Date: Mon, 14 Oct 2002 17:33:51 -0400
From: Albert Henderson <chessNIC@compuserve.com>
Subject: Re: Need Documentation on why institutional subscriptions (2
  messages)

The BBLA article below is accurate except in the reference
to maximizing profits. Most publishers with dual pricing
are not-for-profit associations. The nonmember price is set
to recover costs and underwrite future operations. No one
should doubt that journal prices could be set higher than
they have been. The discounted prices, which are benefits
of membership, generally aim to recover the marginal costs
of producing and distributing one additional copy.

A member disregarding the rules of the association, harming
it to the advantage of a nonmember risks loss of privilege,
perhaps all entitlements of membership. By defrauding the
association the nonmember risks a certain notoriety.

In the 1970s, dual pricing was cited to demonize
association publishers to such an extent that the taxman
took an interest, using the very large American Chemical
Society's as a test case. According to Chemical &
Engineering News. [58,44 (Nov. 3):8 1980]:

 IRS reversed a 1978 contention to revoke ACS's tax-exempt
 status on the basis of large discounts for members who
 subscribe to the society's journals interpreted as
 inurement, "to the benefit of any private shareholder or
 individual." IRS's final position, made without
 intervention by the courts, was that ACS members, "derive
 benefits to the extent that they participate in the
 organization's educational activity, rather than by virtue
 of their membership alone. By subscribing to scholarly
 journals and thereby increasing their knowledge, the
 members serve as the means by which the public will benefit.
 As such, the participating members act in the public's
 behalf and not in any proprietary capacity. The financial
 benefits which attend the educational process constitute
 permissible, incidental, private benefit rather than a
 share of the [society's] net earnings... the subscribing
 members benefit irrespective of nonmember participation."

IMHO, defrauding a publisher as suggested is not illegal in
terms of the criminal code. It signals an ethical lapse,
however. I pity the employees who trust their pensions to
folks who are so creative.

At any rate, the member pays, so the charactization by Mr
Picerno of 'free perks' below is untrue. [Moreover, it is far
more likely that theatre employees help themselves to 'free'
popcorn and pay nothing at all.]

Best wishes,

Albert Henderson
Former Editor, PUBLISHING RESEARCH QUARTERLY 1994-2000
<70244.1532@compuserve.com>

-------------Forwarded Message-----------------

From:   "SERIALST: Serials in Libraries Discussion Forum"
Date:   10/11/2002  6:04 PM
RE:     Re: Need Documentation on why institutional subscriptions (2 messages)

2 messages, 170 lines:

(1)---------------------
Date: Fri, 11 Oct 2002 15:50:14 -0500
From: "Piesbergen, Frances R." <sfrpies@umsl.edu>
Subject: Re: Need Documentation on why institutional subscriptions (Sally Morris)

For a complete discussion of the issues of why it is illegal for
institutions to utilize personal subscriptions, see the Bulletin of the
British Library Association, V. 89, #1, Jan. 2001, pp77-78.  In summary,
the two basic points are "good faith" and "fraud".  Publishers have the
legal right to set differential pricing as long as it isn't done with
"predatory intent".  Since a subscription is a legal contract, it must be
abided by in good faith and can be enforced.  It is also fraudulent for an
institution to misrepresent itself in such a way, or solicit another to
misrepresent himself, in order to achieve an advantage over, in this case,
the publisher.  These are pretty basic legal concepts.

Ask the administrators and legal counsel if they want to go to court to
fight a charge of fraud and see if they still want to get those journals
at the individual rate, rather than the institutional rate.

Here are a couple of the pertinent paragraphs from the BBLA article:

        "It goes something like this: The journal publishers are engaged
in the perfectly acceptable process of differential pricing, whereby a
seller sets different prices for different markets in an attempt to
maximize profits. We see differential pricing all the time-senior citizen
discounts, cheap theater tickets for students, and education discounts for
computer hardware. You may practice it yourself in your library when you
charge different prices for doing searches for your institution's medical
students and for doing the same searches for local lawyers. Generally
speaking, such price discrimination is perfectly fine, unless it is done
with "predatory intent," which Oran's law dictionary defines as "lowering
prices solely to put a competitor out of business" [1].
        So the publishers can set whatever prices they think their various
market segments will pay. Why then, do we have to pay them? This answer is
actually pretty simple. The operative terms are "good faith" and "fraud."
The Universal Commercial Code provides the template against which
individual states enact laws to make things consistent across state
boundaries. "Every state, with the exception of Louisiana has adopted,
with some modifications, Article Two of the Uniform Commercial Code (UCC)
as the main body of law that regulates transactions in goods" [2]. Article
Two describes in great detail the circumstances under which sales can take
place and the various remedies that may be available if there are problems
or disagreements. Section 1-203 says (in its entirety), "Every contract or
duty within this Act imposes an obligation of good faith in its
performance or enforcement" [3]. The act also defines good faith as
"honesty in fact in the conduct or transaction concerned" [4].
        Finally, another legal dictionary supplies the definition of
"fraud": "any act, expression, omission, or concealment calculated to
deceive another to his or her disadvantage," specifically, "a
misrepresentation or concealment with reference to some fact material to a
transaction that is made with knowledge of its falsity or in reckless
disregard of its truth or falsity and with the intent to deceive another"
[5]. The issue of fraud seems pretty clear to me. The publisher has the
right to set the price, and if I, or someone acting on my behalf,
misrepresent myself in order to get a cheaper price for an institutional
subscription, I am committing fraud. On the other hand, physicians who, in
good faith, take out personal subscriptions to meet their own needs and
then want to get rid of the issues in some useful fashion are perfectly
entitled to try to donate them to the library."

See the full article for the footnote references.

Frances Piesbergen                             sfrpies@umsl.edu
Documents Librarian                             ph:(314) 516-5084
Thomas Jefferson Library/dep. 0326        fx: (314) 516-5853
Univ. of MO-St. Louis
8001 Natural Bridge Rd.
St. Louis, MO  63121

(2)---------------------
Date: Fri, 11 Oct 2002 15:44:57 -0400
From: "Peter Picerno" <ppicerno@nova.edu>
Subject: RE: Need Documentation on why institutional subscriptions (Sally Morris)

Ms. Morris:

Your response naturally begs the question as to why libraries and other
institutions should bear the brunt of journal costs so that members get free
perks??? I really have to echo the sentiment which has already been
expressed by someone else on this very topic that maybe if libraries
cancelled their subscriptions, then members, who would have to pay for their
own subscriptions, would take a much more active interest in the entirety of
scholarly publishing which might, after all were said and done, benefit
*all* parties involved.

To continue with your cinema analogy, it would be like charging adults five
times the 'normal' price of a ticket so that the ushers and projectionist
could buy popcorn at less-than-cost prices.

P V Picerno
<ppicerno@nova.edu>

[snip remainder of quoted text  -ed/bml]