The New York Times (reg. req.) has an interesting article on the growing "gray market" in college textbooks (Students Find $100 Textbooks Cost $50, Purchased Overseas). Apparently the exact same textbooks used by colleges in the United States are being offered for sale overseas at substantial discounts, often around 50%. Consequently, arbitrage booksellers are taking advantage of the price discrepancy, such as BookCentral.com (motto: "Brand New Textbooks, Used Prices"). The legality of this was affirmed by the Supreme Court in 1998 in Quality King Distributors, Inc. v. L'Anza Research Int'l, Inc.. The arbitrage is quite substantial:

At one prestigious university, a sophomore imported 30 biology books from England this fall and sold them outside his classroom for less than the campus-bookstore price, netting a $1,200 profit. Next semester, if all goes well, he plans to expand the operation.

We've already seen a great deal of this sort of arbitrage in the drug market, where US residents are buying drugs from Canada, for example, at prices much lower than are available in the United States. The drug importation arbitrage is based on patent law instead of copyright, but the principle is the same.

The policy arguments on behalf of the drug companies and textbooks publishers are similar, except, at least in the case of drugs, there is a quasi-plausible argument that Canadian drugs aren't quite as safe. What can you say about reimported textbooks? Essentially, the argument is that intellectual property goods cost a great deal to produce and price discrimination is necessary in order to allow the holder of the intellectual property rights to gain sufficient return.

This argument carries some weight, but what are we to do about it? Why should struggling US college students (or drug-requiring patients) be the ones to subsidize the production of such goods for students (or patients) in other countries?

Interestingly, it has been the entertainment industry that has been the most successful at foiling the gray market, through "region control" systems that are protected by the DMCA.