The law (BuchPrG) provides a rationale to restrict the free market in this particular case in it's first section (translation by me):
> This law provides protection for books as a cultural heritage. Fixing prices for customers ensures availability of a wide range of books. Additionally, this law ensures that this offer is available to the broad public by encouraging the existence of a large number of stores.
Fixing the prices makes books more expensive but ensures that even small niches are filled that would otherwise be unprofitable and bookstores sell those. It's supposed to be a cross-subsidy by buyers of popular books. Additionally, almost every book store will sell you almost any book (if it isn't in stock they get them overnight).
I think around half of the EU members have such laws in place. It is widely debated whether the law has the predicted effects.
> How can you have market competition if they ban competition?
By having the competition on other levels than prices (not totally, since the prices at which the shop buys the books are not fixed, so they compete for good deals on that end)
Ah, I mostly buy English language ebooks so my situation might be different. Buying English paper books in German stores is usually more expensive for me.
