The Federal Trade Commission has weighed in, rubber stamping the EU's decision to approve the Universal Music Group 1.2 billion euro acquisition of EMI, as expected. The Commission voted 5-0 to close its investigation without taking any action.
Its Bureau of Competition director Richard A. Feinstein said in a statement, "After a thorough investigation into the likely competitive effects of the merger, Commission staff did not find sufficient evidence that the acquisition would substantially lessen competition in the market for the commercial distribution of recorded music in violation of Section 7 of the Clayton Act."
Universal Music-EMI Deal Approved by European Union
In fact, it seems the Federal Trade Commission would have approved the deal without Universal Music Group having to make any divestment concessions.
"We worked closely with the European Commission throughout the investigation, but reached different conclusions because of different evidence unique to each jurisdiction," the Feinstein statement said.
For example, he noted that concentration levels in a number of EU Member States were significantly higher than the combined market share of Universal and EMI in the United States. "Although the Commission did not conclude that a remedy was needed to protect competition in the United States, we note that the remedy obtained by the European Commission to address the different market conditions in Europe will reduce concentration in the market in the United States as well."
Universal-EMI Merger: A Timeline Of Events
For the EU, UMG has agreed to divest the Eurpean catalogs of Parlophone, Chrysalis, Sanctuary, Mute and Virgin Classics on a global basis, resulting in the sale of assets that generate almost $500 million annually.
Feinstein also said, "Based on its review of company documents, discussions with industry participants, and empirical analysis, Commission staff did not find sufficient evidence of head-to-head competition to conclude that the combination of Universal and EMI would substantially lessen competition." While the EU was particularly worried about whether UMG's size could make it a gatekeeper for digital music services, the FTC said it appears that the market dynamics "related to digital streaming services [in Europe] different significantly from those found in the United States."
For instance, the FTC staff found that in order for an interactive streaming service to be competitive it music carry the music of each major. "Because each major currently controls recorded music necessary for these streaming services, the music is more complementary than substitutable in this context, leading to limited direct competition between Universal and EMI," the statement said. The FTC also dismissed the suggestion that EMI served as a maverick in the digital marketplace, something that opponents of the deal said would hurt digital service providers going forward.
"The absence of evidence that EMI's competitive behavior has been disruptive to the status quo in recent years undermined the argument that it had functioned as a maverick," the Feinstein statement said.
The statement also noted that the FTC also did not find sufficient evidence to support the concern that Universal's acquisition of EMI would significantly increase the potential for coordination among recorded music companies, with regards to pricing, since nowadays the cost is more often set on a title-by-title basis. Besides, the statement said, "The net price for each title often is not particularly transparent because of the complexity of negotiated arrangements between record labels, distributors, retailers, and other rightsholders."
With final regulatory approval out of the way, UMG is moving to close the deal by Sept. 28.