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UPDATE 1-US Justice Dept may sue Apple on e-book pricing

* DOJ has warned Apple, five e-book publishers-source
/ Source: Reuters

* DOJ has warned Apple, five e-book publishers-source

* Parties have started settlement talks-source

* Regulators probing whether colluded to raise prices (Adds person familiar with the probe)

The U.S. Justice Department has warned Apple and five of the biggest U.S. publishers that it plans to sue them, accusing them of colluding to raise the prices of electronic books, a person familiar with the probe said on Thursday.

Several parties have held talks to settle the potential antitrust case, said the person, who was not authorized to speak publicly on the matter.

The five publishers facing possible Justice Department action are Simon & Schuster Inc, a unit of CBS Corp ; Lagardere SCA's Hachette Book Group; Pearson PLC's Penguin Group (USA); Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and HarperCollins Publishers Inc, a unit of News Corp.

U.S. and European officials have been investigating whether e-book publishers and Apple fixed prices in the growing electronic book industry, blocking rivals and hurting consumers.

Publishers adopted an "agency model" in 2010 around the time that Apple launched the iPad, allowing publishers to set the price of e-books. In turn, Apple would take a 30 percent cut.

The Wall Street Journal first reported the Justice Department's warning to Apple and the publishers. (Reporting by Diane Bartz in Washington; Additional reporting from Sakthi Prasad in Bangalore; Editing by Lisa Von Ahn)