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Apple reluctant to settle e-book pricing probe as antitrust specter looms


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Three of the five international publishing houses involved in U.S. and E.U. investigations over e-book price fixing are reportedly ready to settle, but Apple along with the two other content providers don't agree to the terms and remain holdouts.

Citing people familiar with the matter, The Wall Street Journal reported on Wednesday that Apple is not willing to agree to settlement terms set forth by U.S. and European oversight authorities, which is pushing the Department of Justice closer to filing an antitrust suit against the iPad maker.

The sources say that the proposed settlement could see the shredding of current "agency model" contracts Apple has with Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins, to be replaced by the wholesale model used by competitor Amazon.

The "agency model" allows publishers to set e-book prices under so-called "most favored nations" agreements that ban the distributors from offering their wares to competitors for lower prices.

By allowing Amazon to revert to its original wholesale model, publishers would no longer be in control as they would sell e-book content to retailers that would in turn set their own prices. This allowed Amazon to sell content at a discounted rate in order to drum up business.

Publishers are afraid that by reverting to the "wholesale model," Amazon will begin selling e-books at below-cost prices which would put pressure on competing retailers. Apple, Barnes & Noble and other outlets would be forced to lower their prices to stay competitive or exit the market altogether.

Wednesday's rumors fly in the face of reports that Apple and the DoJ were nearing a deal not more than a week ago.

Apple and five major book publishers are suspected of colluding over inflated e-book pricing through the company's iBookstore that allegedly helped take some market share away from industry leader Amazon. Investigations are currently underway in the U.S. by the DoJ, while the European Commssion is handling the issue across the pond.

Europe's competition commissioner, Joaquin Almunia, has been working with the DoJ to investigate the matter.

"The companies involved know very well under which conditions we are ready to settle," Almunia said. "If our conditions cannot be met in a satisfactory way, we will continue our investigation."

Some publishers have reportedly offered to compromise and do away with the "most favored nation" agreement with Apple in exchange for retaining the "agency model." The DoJ has said that the solution is not enough and posits that the publishers were only able to reach the model as a result of collusion, according to sources.

People familiar with the case have said that the Justice Department has proposed a "cooling-off" period in which publishers would not be allowed to re-enter the "agency model" in an attempt to dispel any possibility of future collusion. The length of the "cooling-off" period is supposedly one of the topics being discussed at the settlement talks.