M+E Daily

When the U.S. Department of Justice brought its lawsuit against Apple and five leading publishers in April, charging them with conspiring illegally to raise ebook prices by forcing retailers to accept so-called agency pricing, many critics claimed the government’s action would actually harm competition in the ebook market and suppress innovation in the business.

Under agency pricing, ebook sales between publishers and retailers were structured as licenses, which allowed the publishers to set the price consumers paid while the retailer received a percentage commission on each sale. The system was largely designed, the government charged, to prevent the sort of deep discounting of ebooks that Amazon.com had pursued since introducing the Kindle. Higher prices, the government’s critics argued, would allow other retailers to compete fairly with Amazon, which in turn would attract investment into a still-nascent business.

When three of the five publishers agreed in August to settle with the government and abandon agency pricing, many of those same critics filed comments with the court urging it to reject the proposed agreement. They pointed to Microsoft’s $300 million investment in an ebook venture with Barnes & Nobel and Google’s introduction of the Nexus 7 tablet as a means of spurring ebook sales, both of which occurred after agency pricing was introduced, as evidence of its beneficial effects. Without the higher profit margins on ebooks made possible by the publisher-enforced higher prices, they claimed, those investments might not have been made.

The judge approved the settlement anyway. And what has been its effect on competition and investment in the ebook market? Not much.

On Tuesday, Barry Diller’s IAC/InterActiveCorp announced it is pouring $20 million into a new e-publishing venture called Brightline in partnership with Hollywood producer Scott Rudin. Brightline will in turn partner with Brooklyn-based indie publisher The Atavist to begin publishing non-fiction ebooks, expanding eventually into other platforms, including print.

Amazon, meanwhile, quickly resumed its discounting ways, dropping the price of HarperCollins titles to $9.95 in the Kindle Store, as they were before the agency pricing conspiracy. Apple quickly moved to match Amazon’s aggressive pricing.

For now at least, investment and competition seem alive and well in the ebook market, despite the death of agency pricing.