Bertelsmann AG and Sony Music Entertainment confirmed today (May 24) that they have received the European Commission's Statement of Objections concerning the proposed merger of their recorded music di

Bertelsmann AG and Sony Music Entertainment confirmed today (May 24) that they have received the European Commission's Statement of Objections concerning the proposed merger of their recorded music divisions.

The Statement of Objections is part of the "Phase II" investigation process begun by the EC in February. As previously reported, the statement details potential market concerns stemming from the proposed merger, including issues of market dominance. The merger, which would reduce the number of major labels from five to four, would create a company with about 24% of the European music market, second to Universal's 27% share, according to the latest IFPI numbers.

The EC has a final deadline for the investigation of July 22. The next step will be an oral hearing involving Sony and Bertelsmann representatives and other key players, including executives from rival majors, publishing groups, retailers and lobbying groups such as independent labels body Impala.

"Bertelsmann welcomes the clarity this step will give to the debate and remains confident about demonstrating, in addressing the remaining concerns, that the merger will not impede competition," says a Bertelsmann spokesman.

Sony echoes that sentiment: "We plan on working closely with the European Commission over the next few weeks to respond to the concerns raised by the Statement of Objections. We remain confident that the European Commission will ultimately find that the Sony BMG joint venture is a pro-competitive response to the challenges faced by the recorded music industry."

In December, Bertelsmann and Sony Corp. agreed to combine their recorded-music businesses. The proposed joint venture will not include the companies' music publishing, physical distribution and manufacturing units. Sony Corp.'s recorded-music business in Japan, SMEJ, will also be excluded.