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Schools hold key to more competition on textbook market

Competition between distributors and publishers of secondary-education textbooks is limited, thereby preventing the textbook market from functioning optimally. This has been the conclusion of the 2011 Textbook Scan carried out by the Netherlands Competition Authority (NMa). This scan should not be confused with the evaluation of the Dutch Act on Free Textbooks (WGS), which is carried out by the Ministry of Education, Culture and Science.

The previous Textbook Scan was held in 2006, and competition between distributors has considerably slowed down since. One of the reasons is that schools are required to put out European tenders when buying textbooks. There are practically just two major distributors left, resulting in more schools receiving fewer discounts.

Pieter Kalbfleisch, chairman of the Board of the NMa, explains: 'Schools can play a key role here, as they are the ones who set up the tenders. For example, by splitting up the tenders in different lots, smaller distributors may be able to submit bids, either on their own or together with others. Another option would be to impose less strict requirements on potential bidders, such as the minimum number of years experience in secondary education, which may lead to more bidders and thus, more competition.'

The scan's finding that the application of European public-procurement rules has had negative effects on the functioning of the textbook market can be included in the evaluation of the European public-procurement rules, which is currently being carried out by the European Commission. Simplifying European regulations may stimulate entry into the distributor market.

Furthermore, the so-called lump sum compensation that schools receive per student for textbook sets affects competition between distributors. This compensation is the result of the WGS, as parents no longer had to pay for the textbooks, but schools did. Since this lump sum compensation is predetermined, the two remaining distributors are able to accurately predict the schools' budgets, and adjust their bids accordingly. The lump sum compensation thus inadvertently doubles as a target price, limiting competition. This may be avoided by incorporating the lump sum compensation into a general compensation per student.

'Publishers, too, are insufficiently stimulated to compete on price, in part because schools are reluctant to switch teaching methods. In addition, new publishers face high barriers to entry due to the complexity and high costs associated with the development of new teaching methods,' Mr. Kalbfleisch adds.

Increased flexibility in switching teaching methods may help schools counterbalance textbook publishers, and thus influence textbook prices. Alternatively, schools could develop their own teaching materials. Another option is harmonization of educational standards for certain courses in the Netherlands and Flanders (for example, for mathematics). This would allow more (non-Dutch) publishers being able to compete with Dutch publishers.

The WGS has made schools more cost-conscious, because parents no longer pay for the textbooks, but the schools do now. This cost-consciousness has led to a shift in teaching material utilization. A large number of schools use less or other textbooks, but use predominantly less exercise books. Since the textbook market does not function optimally, the recently acquired cost-consciousness has not resulted in lower textbook prices.

The 2011 Textbook Scan is a follow-up to the 2006 Textbook Scan. Reason for the new market scan is that this market has seen some drastic changes in the last few years, in part because of the WGS, which was passed in 2008. The WGS was introduced in part because of the fact that the textbook market lacked price competition due to a lack of price incentives, which the 2006 scan had revealed. In addition, there have been several acquisitions on the secondary-education textbook distribution market. The NMa did not assess these concentrations, because they did not meet the statutory merger-assessment turnover thresholds.

The 2011 Textbook Scan can be found on the NMa's website: