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Q: "My contract calls for a 10 percent royalty on sales of books sold out of the US. When I look at the export sales it looks like the books are being sold much cheaper under the category of Export then they are for US sales. The thing that really bothers me is that my contract states something like 'The Publisher may permit others to publish, broadcast,...The net amount of any compensation received from such shall be divided equally between the Publisher and the Author. ... ' What happened here was the Publishler sold the rights (for Spanish versions) to a subsidiary of itself for a very small price and so my royalties on these books are very tiny even thought there are significant sales."

A: Michael Lennie, Lennie Literary & Authors Attorney:

"Intra-company sales should be conducted on an 'arms-length' basis, meaning that the price charged to a subsidiary should approximate the price charged to an unrelated publisher. For the parent to sell to a foreign subsidiary at an artificially low price thereby severely reducing the author's royalties is considered in some quarters to be fraudulent.

It is not by any means the first time this has happened, but the practice seems to be fading since several of us, including accountant Paul Rosenzweig, have shown the spotlight on the process. Depending on the amount involved, you might want to consider seeking professional assistance. In any event, you would do a service to your fellow authors to identify the publisher which persists in this practice so that other authors can either avoid this publisher or negotiate to avoid the consequences."

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