The European Commission is poised to tell Sony and Bertelsmann within days that their plans to merge music divisions must be revised to take account of anti-trust and consumer concerns, Billboard.biz
The European Commission is poised to tell Sony and Bertelsmann within days that their plans to merge music divisions must be revised to take account of anti-trust and consumer concerns, Billboard.biz has learned.
The Commission -- the European Union's executive body -- could issue its Statement of Objections (SO) as soon as Wednesday (May 19). In it, the Commission will list its potential market concerns stemming from the proposed merger.
The primary issue is one of market dominance, as the merger would reduce the number of music majors from five to four and create a company with about 24% of the European music market. Universal would still be the market leader, with about a 27% share, according to the latest IFPI numbers.
The market-dominance question was raised four years ago when EMI and Warner attempted to merge their respective recorded-music divisions. The majors abandoned their proposal when the Commission indicated in October 2000 that such a merger would lead to an unacceptable "collective dominance" of the European music market by four majors.
But since then, other cases have allayed the Commission's anti-trust concerns. In 2002, the EU Court of Justice ruled that the Commission was wrong to stop British travel company Airtours from buying its rival First Choice on the basis of the collective-dominance argument.
"After Airtours, it will be really difficult to run a collective dominance objection without a high burden of proof," said Davina Garrod, media lawyer at London-based law firm Simmons & Simmons. "I have a feeling [the Sony-BMG merger] won't be blocked."
The Commission will also raise questions on "vertical" integration issues relating to other parts of the proposed conglomerate.
The Commission has a final deadline for the investigation of July 22. The SO must be sent to Sony and Bertelsmann by the end of May, and in itself does not signal that the Commission plans to block a merger. Some 90% of all full-scale Commission investigations result in an SO. The next step will be an oral hearing involving Sony and Bertelsmann representatives as well as other key players including rival majors, publishing groups, retailers and other lobbies like independent labels group Impala.