While the provisional report from the U.K. Competition Commission has dealt a blow to the Live Nation and Ticketmaster Entertainment merger, it appears to be a uniquely British problem according to a competition lawyer.

On Oct. 8, the U.K.'s Competition Commission issued a provisional ruling that the proposed merger would hinder competition in the U.K. ticketing market. But this is not the death knell for the deal, and the commission's concern - which involves the German concert giant CTS Eventim - may not be a major factor when the U.S. Justice department weighs the deal.

The merger was cleared by the Norway Competition Authority in July and the authorities in Turkey have also passed it without any conditions, while it did not appear to require scrutiny in other European markets. At around $5.6 billion, the 2008 combined revenues of the two companies did not fall under the European Commission Merger Regulation criteria for EU-wide scrutiny, which requires a worldwide turnover of more than €5 billion ($7.4 billion).

"There are specific factors relating to the U.K. - the fact that Ticketmaster is so big, 40-50% of the market according to the Competition Commission, and the fact that there is somebody [in CTS Eventim] that's set itself up to enter the market but who potentially is going to be scuppered from doing so because of this deal," says Simon Barnes, Of Counsel for Competition and EU law at the London-based law firm Lovells LLP.

Even CTS Eventim executives have previously expressed confidence that they would not suffer as a result of a merger. Live Nation cut a deal with CTS as it positioned itself to launch its own ticketing company after splitting from Ticketmaster this year. "CTS Eventim and Live Nation will fully honor their commitments under the 10-year agreement they concluded in December 2007," said CTS Eventim CEO Klaus-Peter Schulenberg in March after the TM/LN merger announcement. Schulenberg insisted that the merger would have "no detrimental impact" on the partnership.

"It is quite unusual this sort of situation that they [Competition Commission] are trying to protect somebody who's not even on the market, but they must feel confident that CTS legitimately can be seen as a new entrant who will do well," says Barnes. "If Live Nation had not happened to have done a deal with CTS I don't think this issue would have arisen."

CTS Eventim, based in Bremen, Germany, is moving into the U.K. market as part of its relationship with Live Nation. The European promoter/ticketing company runs ticketing for Live Nation in Sweden, Finland, Poland and the Netherlands and the agreement was in the process of extending into the Czech Republic, Hungary, United Kingdom and Norway. The deal also gave Live Nation a license to use CTS Eventim's ticketing software in North America, where Eventim had not made inroads.

The Competition Commission estimates Ticketmaster's 2008 U.K. market share at between 40-50%; it also operates in Ireland, Finland, Denmark, Sweden, the Netherlands, Germany and Spain, and has affiliates in France, Hungary, Poland, Portugal and Slovakia. See Group was about half the market share in the U.K.

There has been no public statement from See on the proposed merger, but secondary ticketing firm Seatwave welcome the regulator's preliminary report.

"Clearly, the Competition Commission believes that more choice in the market leads to lower ticket prices for fans, consistent with Seatwave's long-held belief," said CEO and founder Joe Cohen. "Seatwave will continue to champion fans' rights to buy tickets from whomever they choose, at competitive prices and with complete control over the disposition of their own tickets. This ruling sends a clear message that promoters and ticketing companies cannot create walled gardens that force fans into a single, higher-priced channel. It appears this ruling opens the way for a more fan-friendly, interoperable future in event ticketing."

Live Nation's business in Europe is broad and includes a string of independent European promotion and management companies acquired when LN predecessors SFX and Clear Channel Entertainment rolled up the European promotion industry beginning a decade ago. Live Nation is the largest festival promoter in Europe, and books and manages a wide range of venues.

The CC listed several possible remedies including the divestment of the U.K. business of either Ticketmaster of Live Nation, probably a distasteful option for either company; or measures to ensure that CTS or another ticket agent can sell Live Nation's tickets.

"In this case the obvious behavioral remedy would be some sort of commitment from Live Nation that it will continue to supply tickets through people other than Ticketmaster," says Barnes. But competition authorities are "quite wary" of behavioral remedies, he adds.

Presumably Ticketmaster and Live Nation would prefer the U.S. Justice Department to focus on this part of the Competition Commission statement: "The Commission has not found any adverse effects on competition affecting other ticketing agents, promoters and venue operators that arise from the merger."

The merger is also being investigated by the U.S. Dept. of Justice, which is consulting with the Competition Commission. The Commission is an independent public body that investigates mergers, markets and regulated industries. The consultation on its findings will run until Oct. 29 and a final report is expected by Nov. 24, following an examination of ways to address the loss of competition. Ticketmaster and Live Nation could appeal its decision.

There has been no further comment from Ticketmaster and Live Nation.