Constitutional Court Rules "Fixed Book Price System" That Enforces Fixed Pricing and Restricts Discounts Constitutional

The Constitutional Court has made its first ruling that the book fixed price system, which imposes an obligation on sellers to sell books at the fixed price and limits the extent of price discounts, does not violate the Constitution.

On the 20th, the Constitutional Court unanimously dismissed (upheld constitutionality) a constitutional complaint case regarding Article 22, Paragraph 4 and Paragraph 5 of the Act on the Promotion of Publishing and Culture Industry (hereinafter referred to as the Publishing Act), which stipulates that those who sell publications must sell them at the fixed price and limits the scope of price discounts, with all eight participating justices concurring.

Article 22, Paragraph 1 of the Publishing Act stipulates the obligation to display the fixed price by stating, "When a publisher issues a publication for sale, it shall set the price (fixed price) for sale to consumers and display it on the publication in accordance with the Presidential Decree." Paragraph 2 of the same article allows the fixed price to be changed after a certain period by stating, "Publications that have passed 12 months from the date of publication may have their fixed price changed in accordance with the Presidential Decree."

Meanwhile, Article 22, Paragraph 4 of the Publishing Act, which was the subject of this constitutional complaint, states, "Those who sell publications must sell them at the fixed price," and Paragraph 5 states, "Notwithstanding Paragraph 4, those who sell publications may freely combine price discounts and economic benefits within 15 percent of the fixed price for the promotion of reading and consumer protection. In this case, the price discount must be within 10 percent." Both provisions were newly established in 2014.

The complainant, Mr. Moon, was an e-book author and a prospective publication seller preparing to establish a one-person publishing company that publishes and distributes e-books and an online e-book service platform company. Mr. Moon filed a constitutional complaint, arguing that these provisions of the Publishing Act, which stipulate the book fixed price system, infringe on his fundamental rights by blocking the opportunity to immediately respond to marketing demands through price discounts after setting the book price.

Mr. Moon argued that these provisions infringe on freedom of occupation and the right to pursue happiness by applying a ban on price discounts only to books, which does not exist in other markets. He also claimed that the provisions violate the principle of equality by prohibiting price discounts on publications without reasonable grounds, even though publications and artworks are essentially the same.

The current book fixed price system under the Publishing Act limits discounts to up to 10% of the fixed price, and up to 15% including mileage and other benefits, to prevent excessive price discount competition. The Constitutional Court first examined the historical background of the introduction of the book fixed price system. The Court stated, "The book fixed price system is a resale price maintenance practice prohibited under the Fair Trade Act but enforced by the Publishing Act." Under the Fair Trade Act, for example, it is considered unfair trade for a business owner to set and maintain the sales price of products for dealers in advance, and such acts are prohibited. However, in the case of books, such resale price maintenance is enforced by law.

The Court explained, "Since the 1970s, the book fixed price system has been implemented as a commercial practice based on contracts between the Korea Publishers Association, a business organization of publishers, and the Korea Federation of Bookstore Associations, a business organization of booksellers. At that time, the Fair Trade Act recognized the book fixed price system as an exception to the prohibition on resale price maintenance." It added, "Since the 1990s, as large discount stores and online bookstores began discount sales of books and price competition became very fierce, the publishing industry demanded legal measures to guarantee the enforcement of the book fixed price system beyond the exceptional allowance under the Fair Trade Act. Consequently, the 'Act on the Promotion of Publishing and Printing' was enacted in August 2002, introducing the current framework of the book fixed price system."

The Court considered the remaining claims of infringement on fundamental rights by Mr. Moon sufficient to be judged by examining whether freedom of occupation was infringed. It examined whether the relevant provisions violated the principle of proportionality (legitimacy of purpose, appropriateness of means, minimal infringement, and balance of interests) and infringed on the complainant's freedom of occupation. The Court judged, "The legislative purpose of the provisions under review?to prevent disorder in the distribution order of publications caused by excessive price competition, to stably protect and foster authors and publishers, to maintain and encourage various bookstores or platforms to expand consumers' access to books, and to provide culturally diverse and rich content publications, thereby protecting and fostering a virtuous cycle in the publishing culture industry ecosystem?is legitimate."

The Court also found the provisions to be an appropriate means to achieve this legislative purpose. It noted, "It is true that since the enforcement of the provisions under review, sales of paper books have decreased and the number of local bookstores has declined. However, this can be seen as a result of social and economic environmental changes such as the development of the internet. In this situation, it is difficult to deny that if there were no measures like the provisions under review to prevent monopolies and oligopolies, such phenomena would have accelerated."

It added, "If differences in capital power and bargaining power in the paper publication market are left unchecked, local bookstores and small to medium-sized publishers are highly likely to be significantly weakened or eliminated, which would lead to a reduction in cultural diversity in our society as a whole. Therefore, the legislature's judgment to restrict price discounts is not only reasonable but also necessary."

The Court acknowledged that while electronic publications have characteristics distinct from paper publications, they have a complementary relationship. It expressed concern that if the provisions under review were not applied to electronic publications, the paper publishing industry might decline, making it difficult to maintain their complementary relationship. It also recognized the necessity of preserving cultural diversity by preventing a few large platforms from abusing economic power in the electronic publication market.

Furthermore, the Court recognized that although the provisions restrict the fundamental right to freely set book sales prices, the degree of restriction is not significant because non-price service competition is possible. On the other hand, since consumer welfare regarding publications as knowledge and cultural products is not limited to economic benefits from purchasing at a low price but also includes the right to choose publications from diverse perspectives and the right to easily receive necessary knowledge and information when selecting publications, the Court found the balance of interests to be maintained.

A Constitutional Court official stated, "This is the first case to determine whether the provisions of the Publishing Act establishing the book fixed price system infringe on the fundamental rights of publication sellers."

This content was produced with the assistance of AI translation services.