Canada’s Campus Bookstores Fight Chain Takeover

Date: 2 Mar 2002 | posted in: Retail | 0 Facebooktwitterredditmail

In January, Canada’s university and college bookstores filed a complaint with federal competition officials over attempts by Indigo, the country’s largest book chain, to assume control of campus bookstores.

The complaint contends that Indigo is violating the terms of a consent order reached with the Canadian Competition Bureau last year. In exchange for approving Indigo’s acquisition of Chapters, the country’s other major bookstore chain, the Bureau required that Indigo refrain from further expansion until mid-2003.

But this fall an Indigo subsidiary approached several universities offering to take control of their bookstores in exchange for an annual payment to the institution. Indigo already runs bookstores at McGill University in Montreal and four small Ontario colleges through arrangements that predate the Chapters merger.

The Eastern Association of College Stores and the Western Canadian College Stores Association have filed a formal complaint with the Competition Bureau. Their complaint is supported by the Canadian Booksellers Association, which represents independent bookstores. “No new retail is pretty clear,” said Todd Anderson, president of the CBA and director of the University of Alberta Bookstore. “So our position is they shouldn’t be able to open any new retail outlets.”

The Competition Bureau says it will have to wait until Indigo inks a deal with a college before addressing the complaint.

Barnes & Noble owns a 49 percent share in the Indigo campus bookstore subsidiary. In the U.S., Barnes & Noble has been aggressively moving into the campus market and now controls 429 campus bookstores.

In the U.S., campus bookstores are a $10 billion industry. About half of colleges and universities run their own bookstores. Another 17 percent, mostly small colleges, have partnerships with off-campus, privately run bookstores. A growing number of institutions are out-sourcing management of their stores. Outside companies now control about one-quarter of campus bookstores. The major players are Barnes & Noble and Follett, which runs 650 stores.

In exchange for their stores, universities receive a fixed annual payment and usually realize a substantial short-term gain from the sale of their inventories.

Critics argue that privatization is not in the best interests of students. Roger Reynolds, president of the Mountain States College Stores Association, contends that the chains can buy in bulk, but they do not pass those savings on to students. They also tend to be less flexible in meeting faculty needs and may have exclusive relationships with some publishers that preclude other suppliers.

Universities do not often solicit a third-party study on the costs and benefits of privatization. Those that do often change course. Last year, Utah State University and Weber State University dropped plans to contract out their bookstores following independent reviews.

Locally owned bookstores rarely bid to manage campus stores. They are at a disadvantage as administrators generally favor companies with substantial resources and a campus track record.

Some, however, are competing head-to-head with campus stores. A New York appeals court recently ruled that faculty book lists must be made available to any store that requests them. The case was brought by an independent, off-campus bookstore seeking to offer students at SUNY-Albany an alternative to the campus Barnes & Noble. Under a now invalid exclusivity agreement with the chain, the university had barred faculty from sharing their book lists with competitors.

Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance, and directs its Independent Business Initiative, which partners with a wide range of allies to implement policies that counter concentrated power and strengthen local economies.