The Company of Stationers Minding Nothing But What Makes for Their Monopoly

Locke and I: Part 3

Continued from Locke and I: Part 2

 

“[A]s all things that are good in this act, the Company of Stationers minding nothing in it but what makes for their monopoly.”

John Locke (1693)

When I called John Locke the following day he was much more cheerful than he was in our previous conversations.

“Good morning Ariel, I’m so glad you called back,” he said when he answered the phone. “Your explanations about Access Copyright’s latest moves allow me to start making sense of it. But you still have to explain to me what you meant when you said that Access Copyright isn’t a normal monopolist, and why it doesn’t behave like one.”

“Fair enough,” I said. “When I say ‘a normal monopolist’ I mean a productive monopolist, namely a monopolist who sells goods or services that consumers actually find valuable. The monopolist’s product may be overpriced, and thus beyond the reach of some consumers, but it is still valuable. The profit that this monopolist earns may include a supra-competitive rent, but it is still derived from the value of its product. However, no matter how secure its market dominance is, a normal monopolist cannot force consumers to buy a product that they don’t need, or force them to pay a price that exceeds the value that they derive from the product. Consumers facing a normal monopolist always have the option of doing without, or seeking second-best alternatives.

This implies that a normal monopolist cannot simply increase its profit by constantly raising the price. Beyond a certain point more and more consumers will opt-out and do without, and new competitors might even find entry to the market more attractive. Therefore, a normal monopolist who is interested in increasing its profit beyond the current level can do one of three things: it can improve the efficiency of its production process, it can improve its product and increase consumers’ willingness to pay for it, or it can invest in rent-seeking to reduce competition and prevent entry. However, it cannot constantly do all of these simultaneously. The more resources the monopolist spends on rent-seeking the fewer resources it can spend on maintaining or improving its productive activity, and vice versa. In other words, for a productive monopolist, rent-seeking entails an increasing opportunity cost.”

“Which means that a productive monopolist will not maximize its rent-seeking efforts to their fullest extent,” Locke said, completing the explanation.

“Exactly,” I said.

“A-ha, but Access Copyright will, because it isn’t a productive monopolist, so it doesn’t face the same opportunity cost and therefore has much less to lose,” he continued.

“Correct,” I confirmed.

“But wait, why are you saying that Access Copyright is not productive? After all, it does represent authors and publishers, who are, by definition, productive and creative.”

“Good question, John,” I complemented him (enjoying the opportunity to treat the great philosopher like a student). “It’s true that Access Copyright represents some creators, but as an organization it is not productive at all.  Unlike its author members, it has never produced anything creative of its own.”

“You mean anything except that ‘Captain Copyright’ propaganda” Locke said sarcastically.

“We’ll give them that one,” I conceded. “And we can add some of its media releases that belong to the fiction genre, but that’s all.”

“And unlike its publisher members it does not produce any added value to works of authorship. It does not perform any content selection and quality control functions, it does not arrange peer-review of works or edits them. It does not even distribute works or print them, or provide user-friendly services for accessing them,” he continued.

“Yes,” I replied. “There might have been a time when it had been able to offer licenses—when ones are needed—more efficiently than its individual members could. But if those days ever existed, now they are clearly gone. When licenses are needed, most of its members offer them quite effectively, and probably more effectively than Access Copyright can and ever will.”

“You see,” I continued, “Access Copyright may talk highly about literature and the arts, and it may even genuinely believe that it promotes them, but as an organization, Access Copyright has become nothing but a fancy rent-seeking and rent-collection shop. This is the only thing it knows how to do, and this is the only function that it is coded to perform. Its sole mission has shrunk to collecting rents from the productive activities of others, and pursue legal rules that would enable it to collect higher rents more easily. For Access Copyright, as I wrote, ‘any market failure, whether real or perceived, presents a business opportunity in the form of a new area of activity that they will be prepared to collect money for. Consequently, they view any reform that would facilitate transactions in a competitive market as a lost opportunity to collectively license this activity, and any proposal to exempt some activities that they are happy to license as an existential threat.’ For Access Copyright, fair dealing is anathema.”

“This reminds me of that line in my Memorandum: ‘as all things that are good in this act, the Company of Stationers minding nothing in it but what makes for their monopoly.’”

“More or less so, yes.”

“So, basically, what you’re telling me,” Locke continued “is that the economic rationale behind Access Copyright’s business model is similar to that of a legalized protection racket. It doesn’t use violence to extort protection, but it uses litigation, misinformation, intimidation, and lobbying to promote rules that create legal risks for its clients, and then charges them money to remove them.”

“Basically, yes” I replied, “’Legalized Protection Racket’—that’s a very lucid way of putting it… One thing is sure, John, you’ve never minced your words.”

“No. I never have,” he said and gave a roaring laugh. His spirit has gotten even much better compared to our previous conversations.

***

We continued talking for a while and agreed that it would have been good if Access Copyright could change and offer some good solutions to problems other than those of its own making, but we were skeptical about its ability to do that. Nonetheless, we also agreed that even though Access Copyright is not coded to transform itself, it is still run by humans, and humans, despite their frailties, their stubbornness and shortsightedness, also possess a remarkable power to adapt.

“So what do you think, is there any hope that eventually they will change?” Locke pondered. “I just looked at their recent Annual Report, and it looks promising. It says that it ‘began a process for renewal for the coming 12 months.’ That ‘at the core of that renewal is the recognition that [they] must better serve the interests of those who use the content licensed by Access Copyright.’ They say that ‘the year ahead will be spent imagining how we can open ourselves to opportunities to serve our creators, publishers and users; and to striking a mandate that is in line with the values of the very people and organizations that we provide licences to—libraries, schools, colleges, universities, businesses and government.’ They even mention that they had set aside $8.8 million dollars for that purpose.”

“I wouldn’t be too optimistic about that. You have to read carefully, John. They say that ‘these funds will be set aside to accomplish three objectives: the positioning and strengthening of the organization for the future; the building and developing of new services and offerings for the education sector; and finally, digesting and dealing with the uncertainty created by Bill C-11 and the addition of education as a fair dealing exception under the Copyright Act.’ If we translate this corporate lingo into English, the first and third purposes mean a promise to invest in more rent-seeking through litigation and lobbying, while only the second purpose is a promise to invest in productive activities. But recall, the more they spend on rent-seeking the less they can invest in productive activities.

Unfortunately, John, these statements too belong to the literary genre of fiction. Instead of looking at its statements, I would rather look at its actions (or what economists call ‘revealed preferences’). Access Copyright may say that it wants to invest in imaging a productive future, but its most recent actions reveal that the span of its imagination is rather narrow, ranging between new Copyright Board applications and a new lawsuit.

Don’t get me wrong, I believe that Roanie Levy and her staff truly want to imagine a new future for the organization, but I’m afraid that the weakness of the organization has overwhelmed the strengths of the individuals who run it. They may have realized that Access Copyright may not be able to transform itself and become productive. They probably understood that other than those of their own making, there aren’t any real problems that the organization can solve. Therefore, they recognized that the only thing that was left for it to do—actions of last resort as it describes them—is to create more problems and ratchet up its rent-seeking activities. Access Copyright will continue to spend every penny of its dwindling rents in a futile attempt to maintain them. It has nothing to lose from attempting that, because it does not know what else to do, and because it is losing anyway.”

“But is there any merit in their allegations?” Locke asked cautiously.

“Not really” I replied. “The merit of its legal case is as shaky as the foundations of its business model. But they will pursue it because they have nothing to lose. Again, normal monopolists cannot impose themselves on consumers and force them to pay a price that exceeds the value of their product, but in its lawsuit against York University, Access Copyright will try to convince the court that its tariff is mandatory, and that York must pay it. Essentially, their theory is that it is entitled to collect an ‘education tax’. I doubt that any court will endorse this theory, but trying is all that’s left for Access Copyright”.

“So I shouldn’t be worrying about the lawsuit against York University?” Locke asked with relief.

“You should still worry. It’s a case that can be won elegantly and easily, but it may also be lost miserably. Especially if York University takes the same hesitant positions on very important questions that the AUCC, the ACCC, or CMEC have taken in litigation to date.”

“Nay, Ariel. I’m not worried, and you shouldn’t worry either, my young friend” Locke shrugged off the concern. “Even if that happens and Access Copyright gains some temporary victories, eventually it will lose. I’m certain about that.”

“What makes you so certain about that?” I wondered.

“Trust the old man,” he said. “It will lose because like its London predecessors it is a lazy, ignorant, Company of Stationers, to say no worse of them.”

***

Both of us fell quiet for a few seconds, each trying to make sense of all that was said, of all that is happening, and all that might occur.  Then I took a deep breath and asked John if I could ask him a personal question.

“I know not why a man should not have liberty to speak whatever he would think,” John replied. “And I know not why whom he has spoken to should not have the liberty of gagging himself if he so desires. Ask and I may answer.”

I tried choosing my words carefully, hoping to maneuver the potential minefield: “You see, John, there’s a sort of confusion about your life. That is, umm–how to say it–something isn’t entirely clear about your biography. I mean, all the references mention that you were born in 1632.”

“Yes, that is correct” Locke confirmed.

“And died in 1704.”

“That is equally true as far as I can tell”.

“So,” I hesitated. “So, if that is correct, you should have been gone three hundred years ago; then how come you’re still around?”

“There’s a very simple answer,“ Locke laughed. “It’s the Stationers’ monopoly; how come they’re still around?”