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What Does Regulatory Capture Explain About Literary Agents?

24 June 2011

Passive Guy recently received an analysis of a publishing agreement prepared by an experienced and respected literary agent who shall remain nameless in this post.

This analysis touched on some legal topics about which PG has made himself conversant over the past few months. In some cases, PG was in complete agreement with the analysis. In other cases, the analysis seemed way off base.

In all cases, the analysis supported what PG expects would be the publisher’s view of the contract in question. The recurring subtext was, “You don’t want to fight the publisher over this provision.”

As PG considered what was going on, he thought about the concept of Regulatory Capture.

Here’s a definition from The Economist:

Gamekeeper turns poacher or, at least, helps poacher. The theory of regulatory capture was set out by Richard Posner, an economist and lawyer at the University of Chicago, who argued that ‘Regulation is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest … Over time, regulatory agencies come to be dominated by the industries regulated.’

As applied to literary agents, it is the “gamekeeper turns poacher or, at least, helps poacher” and “dominated by the industries” portion of the definition that clicks for PG.

Literary agents are creatures of the publishing world. Many have worked for publishers in the past and may do so again in the future. In their daily work, agents are constantly dealing with publishers, whether on major issues like publishing contracts or minor issues like the status of the book tour. A great many agents live and work in and around New York where a great many of their publishing counterparts also live and work.

Indeed, one of the agent’s chief attractions to an author seeking a publisher is the agent “knows how things are done” in the publishing business and “understands how to deal with publishers.”

Few agents have the luxury of representing a single author whose royalties are so large and consistent as to provide the agent all the revenue necessary to practice his/her trade. More typically, an agent represents a group of authors and the group changes from time to time with some authors dropping out and others coming into the author stable.

In order to keep the lights on and cover Manhattan rents and restaurant bills, the agent requires a stream of publishing contracts, each with its advance. This necessitates an ongoing series of contract negotiations with publishers. It is quite likely the agent will be dealing with the same people over and over on the publisher’s side.

Is it a profitable business strategy for the agent to bang heads hard on most or all contract negotiations, squeezing every penny possible out of the publisher? How many times can an agent get up and walk away from the table, refusing the publisher’s best offer? If the agent burns her bridges with an acquisition editor in one negotiation, what effect might that have if that editor is the perfect fit for another of the agent’s clients next month? If bridges are burned with one editor, how will the other editors working for the same publisher or in the same genre across publishers respond to a pitch? What happens if an agent builds a reputation as “hard to deal with” as she fights on behalf of her clients?

Does a publisher absolutely need a deal with a particular new author? Probably not. Does an agent absolutely need to get a deal for a particular new author? Probably not. Does a publisher absolutely need to deal with a particular agent for anyone but a megaseller author? Probably not.

Does an agent absolutely need the ability to deal with at least one publisher in a manner the publisher approves of? Definitely yes. Without a good relationship with a publisher and preferably several publishers, the agent isn’t an agent any more.

Ultimately, for an agent, publishers are more necessary than any author.

When a publisher says an obnoxious clause like the Non-Compete Clause we discussed a few days ago must be in a contract and explains why the publisher needs the clause, how does the agent explain this clause to her client? Probably using much the same rationale as the publisher does. “I know you don’t like it, but the publisher needs this because . . . .”

After explaining the obnoxious clause 100 times to 25 authors, will the agent have a tendency to accept the clause as “the way things are done these days” or “the new standard?” Will describing the clause as something “every publisher is requiring in new contracts” be a better way to get a publishing deal and advance for the author and the agent than trashing the clause?

Since agents and attorneys who work for agents are not regulators, we don’t have Regulatory Capture here. How does Agent Capture sound? Joe Konrath talks about authors succumbing to The Stockholm Syndrome in their dealings with publishers. There may be something like that going on with agents as well.

This became PG’s explanation for what he saw in the analysis of the publishing agreement described at the outset of this post. The analyst was so immersed in the way things are done and the needs of publishers that, almost automatically, the analyst adopted the viewpoint of the publisher on issues of contract interpretation.

To be clear, PG is not ascribing malevolent motivations to agents. His pop-psych theory is that Agent Capture goes with the territory. If you were an agent, you’d get captured yourself. So would PG. He can hear himself as captured PG: “Just shut up about paragraph 17 and sign the blooming contract.”

Passive Guy has negotiated a lot of contracts and also done a lot of litigating, some of it relating to contract disputes, breach and enforcement. Without going into a lot of background, a litigator doesn’t have to agree with anybody on the other side. Litigators don’t usually get captured by anything other than a towering ego.

Before nearly any trial, settlement negotiations occur and most litigation is resolved by settlement before a trial. However, even when the other side was Goliath and his client was David, when the deal wasn’t right, PG has often relished saying, “let’s just let the jury decide.” When a flicker of panic appeared in the eye of opposing counsel, it was a beautiful thing to behold. Sends a chill up PG’s spine just remembering it.

PG is not going to recommend hiring litigators to negotiate your publishing contracts. However, PG does believe the world of publishing contracts would be a better place if there were a bit more litigation regarding the terms and enforceability of contracts.

The Passive Guy Thought for the Day grew out of the decision by the US Supreme Court earlier this week in a class-action suit against Wal-Mart.

It might be worthwhile for authors who had the same or similar objectionable contract clauses in their contracts with a single publisher to discuss the possibility of a class-action suit against that publisher. The authors are similarly-situated in that each one has been damaged by an unfair or unfairly-enforced contract clause.

The nature of a class-action suit is that, while some actual author-plaintiffs would be necessary, the suit would ultimately be pursued on behalf of all authors who have suffered monetary damages or are threatened with monetary damages as a result of the contract and/or the publisher’s interpretation of the contract. Class-action suits allow those who do not wish to benefit to opt-out. Those who do not opt-out get a free ride in the litigation.

Generally speaking, in a class-action suit, the more plaintiffs the merrier, and, even more important, the more damages, the merrier. If a publisher has screwed 1,000 authors, it’s better than if the publisher only screwed 100 authors.

Just a thought in passing.

Obligatory Disclaimer: PG doesn’t practice law or give legal advice any more. Some days he wakes up feeling like it would be wonderful to go to court, but on those mornings, he just lies down until the feeling passes. PG never handled class-action litigation. It’s a specialized area and most attorneys don’t know much about it. You’ll want to find someone who has significant experience with class-action suits if this idea tickles your fancy.

Agents, Contracts, PG's Thoughts (such as they are)

6 Comments to “What Does Regulatory Capture Explain About Literary Agents?”

  1. “However, even when the other side was Goliath and his client was David, when the deal wasn’t right, PG has often relished saying, “let’s just let the jury decide.” When a flicker of panic appeared in the eye of opposing counsel, it was a beautiful thing to behold. Sends a chill up PG’s spine just remembering it.” This statement sure sent chills up my spine!

    A Class Action suit? As I’ve said before, the majority of authors live in fear and semi-poverty. What if I’m blacklisted behind the scenes? What if I’m labeled an author behaving badly? – because when that happens everybody and their brother jumps on the bandwagon. What if no publisher/agent will touch me with a ten-foot pole and I’m scared to try to self-publish? Where am I going to get the money for the initial legal fees? I don’t want to burn any bridges, maybe if I play nice I’ll magically get my money…so many reasons people back off.

    Of course the agent seeks to have a good relationship with as many publishers as possible – this is their bread and butter. This is survival, baby! They gotta make a living like the rest of us.

    • Julia – A quick infobite about class-action suits. Virtually all of them are handled on a contingency-fee basis with counsel advancing litigation costs, so there are no out-of-pocket legal fees for the named plaintiffs. The key hurdle in any potential class-action suit is whether there are enough damages in toto to justify the litigation.

      If I were defending a class-action suit on behalf of a publisher I would advise my client in the strongest terms that no blacklist, formal or informal, be created. That doesn’t mean it wouldn’t happen, but if the contract terms are as miserable as I’ve seen, semi-poverty would seem to be the best these authors could ever hope for.

  2. “Litigators don’t usually get captured by anything other than a towering ego.”

    I’ve been a litigation paralegal for more years than I care to remember, and this comment is so spot on it made me laugh out loud.

    I discovered your blog through Dean Wesley Smith and Kris Rusch. I’ve been enjoying your posts immensely. Just thought you’d like to know, you (former) litigator you. *g*

  3. Dear PG,

    Just went to a convention, the Historical Novel Society, attended by large numbers of aspiring authors who’d signed up for 10 minute meetings with agents and editors.

    Having decided as a moderately successful indie author that I would be a fool to look for a contract with a legacy publisher of any size who would want my ebook rights, I skipped the cattle calls.

    However, I confess, being surrounded by all those people, so vigorously pursuing what they still clearly saw as the brass ring, made me feel a tiny bit anxious about this decision. So, this post was a lovely kick in the pants. I now feel sufficiently vaccinated against the lure of the legacy publishing contract or the belief I need an agent to negotiate the path from writing to readers.

    • Thanks, Louisa. I’m glad the vaccine has worked. Come back regularly for booster shots.

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