Christian Retailers Target Mega-Retailers in Federal Probe

Christian retailers are requesting that Amazon.com, Wal-Mart, and Target be investigated for "predatory pricing" practices that they claim are costing them customers.

CBA, the international trade association of Christian product suppliers and retailers, sent a letter last month to the U.S. Department of Justice in an effort to save hundreds of Christian book stores from closing their doors.

The CBA Board of Directors, including George Thomsen, consider the practices of the three mega-retailers "illegal," "damaging to the entire book industry," and "harmful to consumers."

"Amazon.com, WalMart.com, and Target.com have engaged in a price war in the pre-sale of new hardcover bestsellers and with digital formats," the letter states. "Hardcover books typically retail between $25 and $35. The three mentioned competitors have sold and are selling these and other titles for between $8.98 and $9.00."

Such discounted prices "effectively create a monopoly for new-release bestsellers," CBA contends.

"Amazon.com, Wal-Mart, and Target are using predatory pricing practices in what appears to be an attempt to control the market for hardcover bestsellers," the association charges.

During CBA's 60th International Christian Retail Show last summer, R.R. Bowker General Manager Kelly Gallagher reported that Amazon.com has become the largest single sales channel in the United States for books.

Christian products made up about 10 percent of all book purchases in 2008. However, Christians shopped about 3 percent of their books through Christian bookstores, Gallagher reported. Most bought titles from big box stores and online, he noted. Even active Christians, who have high belief of Scripture and high level of church involvement, were buying books from Christian retailers only 30 percent of the time.

Within the last decade, major retailers such as Wal-Mart have increasingly shelved popular Christian products, such as Rick Warren's The Purpose Driven Life, Mel Gibson's "Passion of the Christ" and Jerry B. Jenkins' Left Behind series. Discounted prices have drawn more and more customers away from Christian bookstores. In 2008, 91 Christian stores shut their doors, according to the State of the Industry survey, and net sales dropped nearly 11 percent.

The CBA Board of Directors say books are typically sold at wholesale at 45 to 50 percent off the suggested list price. Publishers claim they don't offer special terms to big-box retailers and these megastores are selling books far below cost.

"By selling titles below the cost these retailers actually pay to publishers, and at the same price as each other, and at the same price as all other titles in these pricing schemes, Amazon.com, Wal-Mart, and Target are devaluing an entire industry and engaging in an unsustainable practice that ultimately will destroy the entire industry," the directors say in the letter.

"Authors and publishers, and ultimately consumers, stand to lose a great deal if this practice continues or grows – and not just from a business perspective."

They add, "We have already seen in other retail segments dominated by a few companies that consumer choice is severely limited in product quality, style, and availability based on the profit requirements of these singular companies, not true consumer demand. Enabling this type of dominance in publishing will mean fewer voices will be heard, fewer ideas expressed, and potential commercial censorship of titles, authors, or ideas."

Ultimately, they argue, predatory pricing will increase prices as books will only be available through select channels.

Rick Christian, president of the Colorado Springs-based literary agency Alive Communications, maintains, "These retailers can sell hyper-reduced books as 'loss leaders' for a time, but it's an unsustainable model that, without intervention, will shutter hundreds of book stores, force many publishers out of business, gut trade associations, and significantly reduce the number of self-sustaining authors.

"In the short term, consumers will get too-good-to-be-true deals. However, the broad river of titles now available to readers will ultimately be reduced to a trickle, and the vast publishing industry we know will become a relative wasteland."

In other words, everybody loses, Christian said bluntly.

CBA has also asked the Department of Justice to scrutinize the "loss-leader pricing" of digital content, such as e-books or Amazon's Kindle editions, which are sold for around $9.99.