A settlement has been approved in the federal government’s suit against Apple and five of the largest publishing companies, all of which were charged with colluding to fix the price of e-books:

For the next two years, the settling publishers may not agree to contracts with e-book retailers that restrict the retailer’s “discretion over e-book pricing,” the court said. For five years, the publishers are not allowed to make contracts with retailers that include a most-favored nation clause. “The time limits on these provisions suggest that they will not unduly dictate the ultimate contours of competition within the e-books industry as it develops over time,” Judge Cote wrote.

It’s not often that such obvious abuses are so quickly corrected by regulators. There is now no floor under the price of e-books, which means publishing will have to adapt and evolve that much faster, as opposed to conspiring against consumers.

To the extent that this seems to empower Amazon as a mass-market e-tailer, Amazon will ultimately face its own price pressures as content inevitably decreases in price. (Which may be why Amazon seems to be relying so heavily on advertising on its Kindle e-readers for revenue.)

Context and previous Ditchwalk commentary here. Additional cranky commentary here.

— Mark Barrett

In March of 2010, in the face of growing downward price pressure from e-books and open competition on pricing from online retailers like Amazon and Apple, the publishing industry took control of the price of its own products. It did so by abruptly and collectively by abandoning the long-time industry-norm of wholesale pricing and adopting instead what is called the agency model, in which retailers get a percentage of any sale rather than being allowed to set the price of goods themselves. (Like real estate agents and stock brokers, retailers who embrace the agency model never own the products they sell, they simply collect a fee for uniting buyer and seller.)

Fully two years later the federal government is signalling that the price-fixing party may be over:

Among the reported gripes the Justice Department has with the way Apple and publishers are doing business is a move toward setting standard prices and giving Apple a 30% cut of revenue for e-books sold on its devices. The business model, which Apple rolled out with the launch of its first iPad tablet in 2010, differs from what publishers offer to traditional bookstores, which is to sell books to retailers for about half of the suggested cover price and let the booksellers charge whatever they’d like.

As e-books have become more popular and brick-and-mortar bookstores have struggled, the industry has moved to the “agency model” Apple dictated with the iPad and, the Justice Department believes, publishers have acted in concert to replicate Apple’s model with Amazon and others. Publishers have denied such collusion, the report said.

So now you know. If you want to openly conspire to set prices in order to protect your market and limit competition at the expense of the consumer you will only be able to get away with doing so for two years, plus however long it takes the government to drag you into court, prove anything, and penalize you with a slap-on-the-wrist settlement in which you ultimately offer consumers a small price break they will almost certainly never take you up on for products they probably don’t want to buy anyway.

Or, you can avoid the icky, scummy feeling of being a money-grubbing liar by self-publishing your own books.

— Mark Barrett