On February 6, Israel’s “Law for the Protection of Literature and Authors in Israel” went into effect, having been passed by the Knesset last July 31. The title alone should puzzle and worry freedom-loving people. Other than protect the freedom of expression, how does a government “protect literature” in a society where consumers have no restrictions on what they read? Why do Israeli authors need protection that is specifically different from that of other citizens and professionals? Why does the government of Israel, which ranks among the top 5 countries in the world for titles published per capita, need to “fix” a literary situation that is… pretty good as it is? Does any free society, especially that of the People of the Book, need a law to promote literature and protect authors? Or must we protect ourselves from the “protection” of cultural elites? What problem did this law supposedly correct?
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According to the law’s proposal, “… the book market has been dominated by a duopoly of two chains which control approximately 80% of the market, one of which is … controlled by a large publishing house. This causes serious damage to the principle of free competition. The Ministry of Culture believes that … there is no alternative other than to manage the market, even at the cost of intervention in the free market.”

Has this “duopoly” translated into artificially high prices to consumers? Nope. The two major chains, Steimatzky and relative newcomer Tzomet Books, established as a discount chain, compete with one another using large economies of scale to sell books at attractive prices. Smaller book stores in Israel cater to niches, such as graphic novels (comics), used books, foreign language books, science fiction, specialty Judaica, to name just a few. These venues do not even try to compete with the “duopoly” on price alone. So, the current situation actually reflects a very healthy free market in which booksellers offer increasingly better consumer quality as a result of competition and improved customer service.

The law’s proposal proceeds to describe its goals, “to ensure writers appropriate compensation for their work, to promote literature in Israel, to preserve cultural diversity in the publication and distribution of books in Israel, to provide readers an opportunity to choose from a wide variety of books according to their desires and tastes, and enable competition between publishers and booksellers regarding the quantity, variety and quality of books offered to the consumer.” All of these goals reflect lofty ideals and yet all of them are already served in the current free market. Writers aren’t coerced into agreements against their will and Israeli readers enjoy hugely diverse offerings, especially considering that Hebrew is spoken by relatively few people around the world. Somebody’s trying to fix something that isn’t broken.

So, what’s the proposed “fix?” A “protection period” has been defined as the first 18 months from a book’s first publication date, during which two sets of regulations apply. The first is a minimum rate of royalties to be paid to Israeli authors: 8% of the sales price (minus VAT) for the first 6,000 copies sold and 10% thereafter. The second is a prohibition against any bookstore selling a “protection period” book for less than the retail consumer price – except for during Hebrew Book Week and the weeks leading up to Rosh Hashanah and Passover, when booksellers can offer discounts of up to 10%.

The concept of minimum royalty rates might be fine for established authors, who have existing consumer fan bases – and therefore pose smaller risks for publishers. However, new authors present a large risk to publishers, and a minimum royalty rate eliminates any leeway to leverage increased risk with lower royalties. As a new author, I might be willing to substantially reduce my royalties for the chance of establishing myself in the literary world. Under the new law, I’m not permitted to do this. It is no wonder that 270 established authors and translators signed a letter supporting the law, which makes it harder for new authors to compete with them for the patronage of the reading public. It serves as protectionism for the established literary elite.

Any benefits of the prohibition on discounts during the protection period are questionable. According to the head of the Israeli Freedom Movement, Boaz Arad, this is the first time an Israeli law is prohibiting a financial discount to Israeli consumers. While the law assures that authors will receive higher royalties for every book sold, higher book prices will result in fewer books sold. Again, this might favor established authors, but it is likely that new authors will find it much harder to gain readers. Also, is it not possible for authors, especially established authors and publishers, to stipulate some contractual means of guaranteeing a minimum return on every book sold, without needing a law to do so?

The responses of the CEOs of Steimatzky and Tzomet Books to the law’s passage were quite telling. Steimatzky CEO Iris Barel bragged that her company was the only one that supported the bill and thanked its sponsor, Minister of Education, Culture, and Sport Limor Livnat. Tzomet Books was established in 2002 as a competitive, discount alternative to the monopolistic Steimatzky. Tzomet Books CEO Avi Shumer did not comment on the new book law but, regarding price discounts, he said, “We respect all authors who would prefer not to be sold during sales.” How interesting that a law supposedly designed to break a duopoly is supported by the former monopoly holder, but not supported by the discount-oriented bookstore chain. Price-fixing tends to favor established sector leaders, like Steimatzky, who prefer to avoid competing with hungrier business upstarts.

What of other countries which have legislated book price-setting laws? A comparison of 14 European Union countries reveals that those with price-setting laws release significantly fewer book titles per 1000 citizens than do countries with either completely unregulated literary markets or those with non-legislated sector-wide agreements. Finland abolished its book law in 1971 and Great Britain did so in 1996. In both cases, the result was substantial growth in both countries’ bookselling sectors. Both history and common sense indicate that this law will make books more expensive in Israel and damage the literary market. Fewer new titles will be published, fewer books will be sold, and fewer new authors will be published.

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The book business is not an easy one. The digital age has brought us Amazon, e-commerce, digital books, e-coupons, and instant price comparisons, disruptive technologies which pose major challenges to the publishers and booksellers. Government protectionism will not make these challenges go away, it will just reduce the incentive of these industries to adapt and thrive under new conditions. Besides, the provisions of this law do not meet the rhetoric of the law’s declared justification. The law does not encourage the diversity, quantity, or quality of literary offerings. Writing is one of the hardest professions by which one might scratch out a living; very few authors sustain themselves on their books alone. But is this such a bad thing? The greatest authors of the past 200 years have not demanded government protections – they had day jobs. At this point, new authors might find themselves “protected” to the degree of being un-publishable.

The recent legislation seems less concerned with the health of the Israel’s literary sector than with the interests of entreched players like Steimatzky and the established intellectual elite – who seem to think they are entitled to their positions of influence independently of the choices of the consumers who sustain them. The cause of literature and literary culture is served when a well-read public has easy, cheap access to a dynamic marketplace that presents the work of both established and new authors. The best way a government can serve such a cause is to stay out of the way.

Free markets benefit consumers by linking customer value and merit with business success. The apparent apathy of Israeli lawmakers over this government intrusion into the intellectual marketplace, which will end up hurting the Israeli book buyer, is cause for concern. The law passed with 45 ayes, 3 nays, and 72 abstentions. Even disregarding the gaping disconnect between MKs and Israeli citizens, this legislation can hardly be considered the will of the people. The People of the Book deserve better – but it’s up to them to demand it. One group actively fighting the law is the Israeli Freedom Movement (www.liberal.co.il). Given the importance of books to the Jewish people, it would be nice to think that this law might wake up more of us to Israeli government over-reach.