3 Book Distribution and Bill 51 in Quebec

It may be difficult to grasp all the subtleties of the relationships between the various sectors in the book trade in Quebec without a good understanding of the principles underlying the Act respecting the development of Quebec firms in the book industry, which governs certain business practices in the book industry.

3.1 The système d'office and prenotification

In the 1970s, the book industry in Quebec adopted a practice already common in France as its principal method of marketing books, particularly new titles: the so-called système d'office. The principle of the système d'office is that under a prearranged agreement between the diffuser and the bookseller, the retailer automatically receives a certain number of copies of every new title from a given publisher on its release. These shipments are made with right of return.

This system was established to grant publishers better visibility in order to quickly release their new titles into the retail trade network, and to provide retailers — whether in major cities or in remote regions — with access to new titles as soon as they are released. Thus, the système d'office has promoted greater variety of choice for consumers and better access to books across the province. It allows more efficient diffusion of new titles and reduces work, and therefore costs. The système d'office is very different from the preferred practice in English Canada and in most other countries: the standing order, which is based on orders from catalogues of upcoming titles.

Système d'office shipping also involves a number of commitments that bind each party. Thus, it is agreed that shipping costs for titles shipped through the système d'office will be charged to the distributor, but the costs of returns will be the responsibility of the bookseller or retailer. Thus, it is to each one's advantage to accurately estimate the number of copies likely to be sold in order to reduce shipping and return costs. Similarly, the bookseller undertakes to stock the copies received under the système d'office for at least 120 days before taking advantage of the right of return; the distributor for its part undertakes to comply with the terms and conditions set out on the système d'office order forms.

The prenotification, a second essential tool of the système d'office, was introduced in the late 1970s. Prenotification is a mechanism that makes it possible to alter the order for a given title in the système d'office order form. When meeting with the customer, the diffuser's representative provides information on the list of upcoming new titles and the quantities of books the customer should receive in accordance with the système d'office order form. These quantities can then be increased or decreased by mutual agreement. This revised quantity is called the prenotification. Originally, the increase in the number of copies of a title through the prenotification had the status of a firm order, without right of return. However, with time, the prenotification has merged with the système d'office and is delivered at the same time and under the same conditions as the système d'office, with right of return.

In the past few years, mainly because of the growing number of new titles, calls for bookstores to handle an excessive number of titles and copies, and the need and desire of booksellers to serve their clientele by better targeting their needs, the prenotification has taken on greater importance than the système d'office. Booksellers would like to choose the titles to be sent to them despite the return right under the système d'office. However, although the prenotification makes it possible in theory to improve bookstores' collections to better suit their own clientele, the fact remains that it requires considerable effort on the part of the diffusers, since every title has to be discussed and reviewed individually, which increases the costs of marketing books. Moreover, there is no evidence that the prenotification has reduced the return rate. Similarly, although it does somewhat reduce the risk associated with marketing titles by lesser-known authors, at the same time it limits the possibility that a title may find a market that the bookseller did not initially anticipate, which may limit the diversity of supply.

3.2 The principles of Bill 51

In late 1979, the Government of Quebec passed a bill to improve the development of Quebec's book industry, improve the diffusion of Quebec literature and increase book accessibility by establishing commercial practices in the sector. The new legal provisions took effect in June 1981 under the Act respecting the development of Quebec firms in the book industry, commonly called Bill 51, which is widely believed to have revolutionized the book trade and allowed it to expand throughout Quebec.

First, Bill 51 confirmed the concept of bookstore accreditation and extended it to publishing and distribution companies. Accreditation is an official recognition granted by the government, certifying that a business meets a certain number of conditions in terms of supply and quality of services, and granting it the right to certain advantages arising from its status as an accredited business.

In the book trade in Quebec, the conditions and advantages of bookstore accreditation specifically impose the principal commercial practices in the sector. First of all, to receive accreditation, a bookstore must meet certain requirements related to its ownership structure, its place of business and the services offered. In particular, it must have the following characteristics:

  • Have its head office or principal place of business in Quebec; be incorporated under either the Statutes of Canada or the Statutes of Quebec;
  • Demonstrate that it is controlled or owned by Canadian citizens domiciled in Quebec;
  • Have sold to private individuals, during the fiscal year preceding the application, the lesser of $100,000 worth of books or one third of its overall book sales;
  • Have sold books for not less than $300,000 or not less than 50% of its total sales figure, whichever is less, in the case of a bookstore in a municipality with a population of over 10,000, and not less than $150,000 for a bookstore in a municipality with a population of 10,000 or less;
  • Receive standing orders from 25 accredited publishers and display the titles for at least four months;
  • Operate an establishment that is easily accessible to private individuals from the street or a mall; keep this establishment open all year round; and
  • Own adequate bibliographical material, as defined by the Regulation respecting the accreditation of bookstores.

In addition to setting out the conditions governing the quality of the service offered to individuals and institutions, the Regulation stipulates that the accredited bookstore must:

  • In the case of books for which it has exclusive distribution rights, receive its supplies from an exclusive accredited distributor; and
  • Keep an inventory of at least 6,000 different book titles, including at least 2,000 different titles of books published in Quebec and 4,000 different titles of books published elsewhere.

In return, an accredited bookstore, in addition to being eligible for financial assistance from the government, is entitled to take advantage of the provisions set out in the Regulation respecting the acquisition of books by certain persons from accredited bookstores. One particular clause of the Regulation is of vital importance to bookstores and has a major impact on the work of distributors:

  • Any acquisition of books on behalf of an institution must be made in the accredited bookstores in the region where the institution is located.

Not only has this clause governing institutional purchases radically changed book-purchasing practices in Quebec, it has also dictated the main business practices of diffusers and distributors. Thus, diffusers — except for textbook publisher/diffusers, since textbooks are not subject to this clause of the Regulation — may not sell books directly to a public institution, such as a school, library or other government-funded institution. All purchases for these institutions must be made from accredited local bookstores. This therefore explains why wholesalers regularly serving institutional markets have never become established in Quebec.

Two clauses in Bill 51's regulations determine business practices in the supply chain with respect to the discounts each intermediary is to grant to its commercial partners. On the one hand, Schedule B of the Regulation respecting the accreditation of Quebec distributors and the method of calculating sales prices stipulates that the distributor must grant an accredited bookstore a discount of at least 30% on dictionaries, encyclopedias, law texts, medical texts, books providing an introduction to a science or technology, including the humanities and social sciences, and whose format and presentation are such that the books constitute instructional material, and 40% on any other books, except for textbooks not covered by the Act. On the other hand, the Regulation respecting the acquisition of books by certain persons from accredited bookstores stipulates that the sales price of a Canadian book must be billed using the publisher's list price or net price; the sales price of a foreign book under exclusive distribution rights in Canada must be billed in Canadian currency using the list price or the Canadian net price set by the exclusive distributor.

Not only have these two clauses set out the discount rates between middlemen, retailers and purchasers, but their general intent has encouraged an environment where negotiated discounts remain moderate, even, as we will see below, in the mass-market channel, which does not, however, seem to respond to any outside regulation. Despite certain practices making any mass-market discount negotiable, Quebec has not seen the same inflation as has occurred in the other provinces. Thus, Bill 51 and its Regulations have constituted and still constitute a mechanism to stabilize the book trade in Quebec and even in other parts of French Canada, and have sheltered distributors from a headlong race to excessive discounts.

Lastly, the Regulation respecting the accreditation of Quebec distributors also sets out the rules for setting tabulated statements (tabelles), which are used to calculate the price of foreign books for which no Canadian price has been set by the publisher. A tabulated statement is “the factor by which the list price or net price of a book in its country of origin is multiplied to establish the maximum price of the book in Canadian currency.” Distributors, whether accredited or not, must comply with these tabulated statements when calculating the Canadian price of foreign books.

3.3 Effects of the système d'office and Bill 51 in Quebec

The système d'office has greatly facilitated the work of diffusers and booksellers making it possible to better serve bookstores far from major centres, which, without système d'office shipments, would have had difficulty gaining access to a variety of titles. The système d'office has had a considerable impact on diversity of supply. It has also resulted in significant time and cost savings for all sectors involved.
The most remarkable effect of the introduction of Bill 51 has been to encourage bookstores to open throughout Quebec and to remain open. The clauses stipulating that all institutions must obtain their books from local bookstores gave these bookstores better access to their own markets and gave them the conditions and ability to increase diversity of supply for individual consumers.

Table 1. Growth in the number of accredited bookstores and revenue of accredited bookstores in Quebec, 1983-2000,
  1983198619891992199619982000
Number of bookstores 168 172 189 211 210 218 211
Total revenue ($K) 123,125 151,089 219,861 262,639 342,539 449,362 484,315
Source:    Marc Ménard and Benoît Allaire, "Les librairies agréées au Québec" [Accredited bookstores in Quebec], in État des lieux du livre et des bibliothèques, Observatoire de la culture et des communications du Québec, p. 149.

Largely thanks to Bill 51, the number of accredited bookstores in Quebec increased from 168 in 1983 to 211 in 2000. The picture is not all positive for bookstores, since according to data from the Quebec Ministère de la Culture, des Communications et de la Condition féminine [Department of Cultural Affairs, Communications and the Status of Women], the number of accredited bookstores today is 208.

Furthermore, the steady growth in the total revenue of accredited bookstores, with their average annual growth rate of 8.4%, reveals the parallel growth of diffuser/distributor activity, considering the expanded territory and requirements imposed on the whole book trade by the introduction of the Act. We should also keep in mind that Bill 51 has encouraged Quebec ownership of businesses in each sector of the book trade: publishers, booksellers and distributors. In the 1970s, only one of the four largest distribution companies was Quebec-owned.1

However, the système d'office has also had negative effects. Over the years, it has produced an avalanche of new titles in bookstores, where it has become a struggle to open all the deliveries and find room for the copies on already crowded shelves. A steadily increasing number of titles with ever-shorter print runs are choking the market, and diffusers and booksellers are no longer able to do their work properly. Today, it is widely recognized that it is time for a review of how the système d'office works and that it must adapt to the industry's new realities.

It is not surprising to see that the système d'office, together with the increased number of new releases, has resulted in a considerable increase in the return rate, which, between 2001 and 2003, was around 25% for total distributor sales, but around 27.5% for bookstore sales.2 In part two of this study, we will examine the issue of returns in greater depth.

3.4 The impact of Bill 51 in other Canadian provinces

Since it was introduced in Quebec, use of the système d'office has spread throughout the entire French-language book market in the other provinces. This measure has been beneficial for the bookstores and other retailers concerned, since efforts at book diffusion in these areas were very limited, or non-existent, and a supply agreement based on a système d'office order form guaranteed them fair and continuous access to new titles.

The introduction of Bill 51 in Quebec has also had an impact on Francophone communities across Canada. Although French-language publishers and booksellers in New Brunswick and Ontario are not directly targeted by the Act, the rules it imposes on the book trade have in any case made an impact on their professional activities. Publishers or booksellers know, for example, that they may not sell their books directly to Quebec institutions, which must buy from accredited bookstores in Quebec. However, what is frustrating is that booksellers in New Brunswick do not enjoy the same protection for their own territory: they see Quebec publishers and distributors selling directly to institutions in their province with no concern for the survival of local bookstores. They are thus victims of the lack of reciprocity between provinces in the cultural sector. A recent study has demonstrated that only 36.5% of purchases by the New Brunswick public library system were made from New Brunswick bookstores. Whereas in Quebec, where the Act obliges institutions to buy books at the list price, Quebec distributors and bookstores negotiate with institutions in other provinces and grant them discounts that local bookstores cannot compete with.

It should come as no surprise that this has led book trade stakeholders in some provinces to attempt to counteract the effects being felt as a consequence of Quebec's Bill 51. New Brunswick is currently working on releasing its book policy. It remains to be seen whether this policy will include measures to protect the local market for bookstores in the province. A committee was also established recently to develop memorandums of understanding in Ontario's French-language book trade and possibly to propose a book policy for Francophone Ontario.

Notes

1 Michel Lasalle and Renée Gélinas, Étude sur la mise en marché des nouveautés par le système de l'office au Québec, Table de concertation interprofessionnelle du milieu du livre, 2007.

2 Observatoire de la culture et des communications du Québec, Institut de la statistique du Québec.

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