The Swiss cabinet has rejected calls to maintain the net book agreement (NBA) in Swiss-German regions, which allows publishers to fix the price of books.
According to the book industry, the move will destabilise the market in German-speaking parts of the country and cause many small bookshops to close.
The government announced its final decision on Wednesday stating that it did not wish to oppose the Swiss Competition Commission (Comco), which had banned the agreement in March 2005, and added that "cultural interests could be safeguarded by other means".
Economics Minister Doris Leuthard said that putting an end to fixed pricing was the "right decision" from both a cultural and economic perspective.
"It will allow a drop in prices without condemning small bookshops," she added.
This decision follows an appeal to the government by the book industry, which had requested an exception on fixed pricing.
The appeal had been their last lifeline to maintain the current system following the Comco ban, which had subsequently been upheld by the Federal Court in March 2006.
"This is bad news," said Jacques Scherrer, secretary-general of the Swiss Association of Distributors, Editors and Libraries. "The government hasn't recognised the status of the book as a cultural item and its decision risks destabilising the book market in German-speaking regions."
A disappointed Martin Jann, director of the Swiss Association of Booksellers and Publishers for German-speaking Switzerland, said he feared that many small, independent bookshops would be unable to compete with the large distributors.
"It's not interesting for the consumer either, as when a bookshop closes, the diversity on offer is reduced," he commented.
The book industry had based its appeal on the fact that most books were "cultural goods" and not simply consumer products. And they had argued that the book market should be protected from unrestricted price competition.
Around 90 per cent of German-language books in Switzerland are subject to the NBA, which does not affect the French or Italian-speaking parts of the country.
However, over the last few years, the development of specialised chain stores selling books in French-speaking Switzerland has caused numerous independent bookstores to close.
Like Comco, the government argues that a link cannot be made between the price of a book and the diversity on offer.
The Swiss economics ministry claims that the number of titles published each year in French- and German-speaking regions remains the same.
It adds that the density of bookshops is greater in French-speaking regions - one per 10,060 inhabitants – than in German-speaking regions – one per 11,457 inhabitants. In France, which also has a fixed price system, there is one bookshop per 24,800 inhabitants.
The government added that it had already taken numerous measures to promote reading and publishing, in particular via organisations such as The Swiss Arts Council (Pro Helvetia) and the National Library.
swissinfo with agencies
The Swiss spend around SFr1 billion ($823 million) every year on books.
Some 50 million books are available in Swiss bookshops.
The book industry is the main cultural player in Switzerland.
The NBA is in force in many of Switzerland's neighbours, including Germany and France.
In 1995 a similar agreement ended in Britain. A report published by The Booksellers Association found that, as a result, the number of stockholding bookshops decreased slightly, with smaller shops being more affected.
But it also found that new players, such as supermarkets and the internet, arrived on the market - meaning that books are more widely available than ever before.
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