The American Antitrust Institute, a Washington-based non-profit education, research, and advocacy organization, has issued a white paper entitled "Music Industry Consolidation: The Likely Anticompetitive Effects Of The Universal/Emi Merger" that urges the Federal Trade Commission to block Universal Music Group's proposed acquisition of EMI's recorded music operation. In other UMG-EMI news, a report surfaced today claiming national regulators from the 27 E.U. strtes will vote on the deal next week.

Research Fellow Flavia Fortes argues in her white paper that, "Based on an analysis of publicly available information, we believe Universal's acquisition of EMI's recorded music division may substantially harm competition in the U.S. markets for physical and digital recorded music services."

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Moreover, the paper says that the proposed transaction, if completed, would "likely to lead to unilateral and coordinated anticompetitive effects, which are unlikely to be cured by divestitures or behavioral relief. The paper also predicts that the merger will harm competition and leave diminished consumer choice and less digital innovation.

Using the Herfindahl-Hirschman Index and formula, which measures the size of the merged firms in relation to the overall industry, the white paper calculates that the UMG EMI deal would give the merged entity a score of 2,762 HHI. Any score above 2,500 is considered a high concentration level. "Structurally, at least, the transaction is therefore presumptively anticompetitive by a wide margin," the paper concludes.

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The merger, Fortes claims, will create "a super major," which would reduce marketing and promotional opportunities for competitors and also would be a de-facto gatekeeper, capable of blocking new services.

Universal Music Group issued a statement on the white paper. It stated that, "The AAI's analysis uses a lot of hypothetical assumptions and misconceptions that are not grounded in the realities of the music business today. The industry is intensely competitive, indies are thriving and consumers have more choice than ever. Universal Music's acquisition of EMI is not going to alter this."

It also made the point that the paper completely misses the benefits of UMG's plans to reinvest in reviving EMI. UMG further states that its acquisition of EMI "will create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services. We are working closely with the Federal Trade Commission and remain confident of regulatory approval."

The Federal Trade Commission is expected to make its decision on whether to approve the deal sometime in September, Sources say it has ended its marketing investigation and is now deliberating on the deal.

In an unrelated development, Bloomberg news reported today that the European Commission's review of the UMG/EMI deal will soon be in the hands of representatives of national competition agencies from the 27 EU states, which will vote on the merger by the end of the week. After that vote, the EU Commission will make its decision on whether to approve the deal, which the report said could happen as soon as Sept. 19. A positive vote by the national regulators would likely lead to the EU commission approving the merger. Another source, however, insists that the EU Commission will first makes its decision, and then pass its recommendation onto the committee, which votes on it.

The EU Commission could not be reached for comment at press time.

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