Apple is being sued by the US government over allegations that they conspired to fix the prices of e-books, along with five publishers.
The Justice Department accused Apple of colluding with the five publishers as the Silicon Valley giant was launching its iPad in early 2010 and was seeking to break up Amazon's low-cost dominance in the digital book market.
E-book prices are said to have gone up an average of $2 to $3 in a three-day period in early 2010, according to the lawsuit filed by the Justice Department in US District Court for the Southern District of New York, on Wednesday.
A settlement was reached with three of the publishers and this will allow Amazon to resume discounting books, and will terminate the "most favoured nation" contracts with Apple.
Amazon said in response to the settlement that it plans to lower prices on books associated with its Kindle e-reader.
The pact also requires the publishers to wait two years before entering into any "agency model" agreements that prevent retailers from offering discounts on electronic books.
The publishers who agreed to settle are HarperCollins Publishers, Simon & Schuster and the Hachette Book Group.
Hachette and HarperCollins also settled with a group of US states, agreeing to pay $51 million in restitution to consumers who bought e-books.
Publishers Macmillan and Penguin plan to fight the Justice Department charges, along with Apple.
James McQuivey, a media analyst at Forrester Research, said e-book prices were destined to come down, even without a Justice Department settlement, because publishers themselves have been experimenting with discounting to stimulate sales.
"It essentially will accelerate the reversion back to the sub-$10 prices that Amazon had already established as the standard," McQuivey said.
The e-book market has boomed in recent years. Sales grew from $78 million in sales in 2008 to $1.7 billion in 2011, according to Albert Greco, a book-industry expert at the business school of Fordham University.
A Pew Research Center survey released last week found that one in five American adults read an e-book in the last year.
