The small stores, represented by the American Booksellers Association, accused the book giants of using their size illegally to demand major discounts from publishers, a move they alleged undermined mom-and-pop stores that could not compete.
But after unfavorable rulings in federal court here, the ABA dropped the suit in exchange for Barnes and Borders paying about a quarter of the ABA's $16 million in legal expenses.
"This settlement is nothing short of a total vindication for Barnes and Noble," said Leonard Riggio, Barnes' chairman.
Representatives of two book giants said the settlement, which prohibits the ABA from suing them again on the same grounds for three years, was cheaper than battling the lawsuit.
The ABA, based in New York, portrayed the settlement as its own victory.
"The objectives of the litigation have, by and large, been achieved," the ABA's board of directors said in a statement.
The independents had wanted to pay the same prices for books as do Barnes and Borders, but the settlement does not require publishers to do that. U.S. District Judge William H. Orrick had earlier ruled that the independents were not entitled to damages because it would be impossible to determine how much they were harmed, if at all.
"Fizzle. Fizzle. Fizzle," said Stephanie Oda, who publishes Subtext, a Connecticut newsletter covering the bookselling industry. "Business is not fair. This is a capitalistic system."
The ABA argued the book giants were violating the Robinson-Patman Act of 1936, enacted to prevent large businesses from using their purchasing power to gain market advantage. The book giants said they were entitled to discounts because of their ability to move large volumes of books.
It was not the first time the ABA has taken its claims to court. In 1998, it settled a claim with publishing house Penguin USA of New York alleging that it offered illegal secret discounts and payoffs to large book chains and book-buying clubs.
As major bookstore chains have expanded to new territories in recent years, the number of independent bookstores has declined. From 1994 to 1997, the four largest bookstore chains - Barnes, Borders, Crown Books and Books-A-Million - expanded their collective market share from 35 percent to 45 percent, the ABA said.
The association has about 3,000 members, down from its peak of 5,000 five years ago. Barnes and Borders operate 937 and 335 stores, respectively, and are expanding notably in California.
(c) MMI The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed