Pricing of ebooks set for new upheaval The publishing industry's business model in the ebook age is on the verge of another upheaval as expectations grow for a partial settlement of price-fixing investigations on both sides of the Atlantic. The Department of Justice could announce as soon as the beginning of next week that three of five publishers have agreed to a settlement, people familiar with the US probe said. However, they cautioned that talks remained "fluid" and said the DoJ had appeared close to agreement before, only to extend its negotiations. The DoJ began investigating the industry last year, looking at publishers" 2010 shift from a "wholesale" model in which ebook retailers led by Amazon set prices, often at a discount to the wholesale price to win market share, to an "agency" model in which publishers set the price, of which the retailer keeps 30 per cent. The DoJ is examining whether publishers colluded to raise ebook prices with Apple, whose iPad tablet gave them an alternative outlet to Amazon's Kindle ereader. The European Commission has launched a similar investigation. Publishers have denied collusion and argued that the agency model has encouraged competition by reducing the growing dominance of Amazon in the burgeoning ebook market. Publishers and the DoJ declined to comment. But people familiar with their discussions said a settlement involving only half of the top publishers could result in Amazon discounting titles of publishers who settle, putting pressure on publishers outside the settlement to lower their prices to compete, at a cost to their profit margins. The DoJ is expected to settle with HarperCollins, owned by News Corp; Simon & Schuster, part of CBS; and Hachette, owned by Lagardère of France. Macmillan and Penguin, a division of Pearson, which also owns the Financial Times, are expected to resist a settlement, both to preserve the agency model and to contest collusion allegations. Random House, which adopted the agency model later than the rest of the industry, is not a target of the probes. The Wall Street Journal reported this week that Apple was also reluctant to settle. Industry members said a settlement may not strike out the agency model altogether, but those that settled may have to renegotiate their contracts with ebook retailers, ending the "most-favoured nation" agreement with Apple in which they agreed not to sell ebooks more cheaply to other retailers. "If the agency model blows up it will be like the Wild West," one industry member said. The pricing structure is going to be so complicated. We don't know how it's going to work with retailers," another said, predicting that agency agreements could return after a "cooling off" period. Publishers outside the settlement would have to examine "whether the strategic advantages of maintaining a plurality of [ebook retailers] outweigh the cost of matching Amazon's loss-leading pricing," a third industry member said. Oren Teicher, chief executive of the American Booksellers Association, said on Thursday that the agency model had encouraged competition to Amazon from retailers including Apple, Barnes & Noble, Google and Kobo, and reduced prices to booksellers and consumers. "Before the introduction of the agency model, a single online retailer [Amazon] was selling ebooks significantly below cost, dominating this nascent market, and rapidly growing readership in their proprietary format," he said. "In our meeting with DOJ, we argued strongly that if the agency model goes away, there is every reason to conclude that major online retailers will again use considerable resources to dominate - and ultimately monopolise - the market," he added.