Universal Music Group has formally received the European Competition Commission's Statement of Objections regarding its proposed purchase of EMI's recorded music department, a step that the company had long expected part of the normal EU regulatory process.
The Statement outlines a list of issues the EC has found with Universal's bid, meaning that Universal will almost certainly have to make concessions to comply with the EC's antitrust regulators, potentially by offloading labels.
Universal released a statement today regarding the Commission's findings, saying "As part of the European Commission's customary process when considering mergers, they have provided us with a Statement of Objections. We are preparing a detailed response to the Commission's statement which will address the concerns outlined in this procedural document. We will continue to work closely with the Commission and look forward to securing regulatory clearance."
In April, the European Commission approved the $2.2 billion sale of EMI Music Publishing to Sony/ATV after the latter offered to sell publishing assets worth $20 million in royalties in an attempt to get the EU to approve the transaction without having to face second-stage scrutiny.
The $1.9 billion EMI Records sale is a separate deal facing separate regulatory scrutiny.
Last week, it was reported that UMG CEO Lucian Grainge, EMI chief Roger Faxon, and Live Nation CEO Irving Azoff would all appear before a U.S. Senate antitrust subcommittee to be held this Thursday to argue for the deal, with Beggars Group's Martin Mills, Warner Music Group former chairman/CEO Edgar Bronfman Jr., and Public Knowledge president Gigi Sohn set to appear and argue for the opposition. Warner, as well as many independent labels and artists, have been outspoken critics of the sale, which would give Universal 40 percent of the recorded music market and a prominent voice in price setting and future industry intiatives, especially in the digital sphere.
Sen. Herb Kohl (D-WI) announced in May that the antitrust subcommittee would be holding these hearings, despite the fact that the committee has no formal influence over the eventual decision of the U.S. government's federal antitrust regulators.
On June 8, EC Competition Commissioner Joaquin Almunia outlined his concerns about the merger. "Ultimately, we will need to make sure that, in this already concentrated market, the company that would emerge from the deal would not be in a position to shape the future landscape in the digital music market to the detriment of users and artists," he said during a speech in Switzerland. "A company with a large and popular catalogue can have significant market power over digital platforms, which would have a keen interest to strike a deal with it. Competition authorities have the responsibility to monitor these market developments and allow all participants to play their part."
The Statement of Objections the EC delivered to Universal has not been released. The European Commission has given itself a Sept. 6 deadline by which to make a decision on the deal.