The Court of First Instance in Luxembourg is hearing today (Sept. 22) the appeal case brought by indie labels' organization Impala against the European competition watchdog over the Sony BMG merger.

The Court of First Instance in Luxembourg is hearing today (Sept. 22) the appeal case brought by indie labels' organization Impala against the European competition watchdog over the Sony BMG merger.

The one-day hearing will see all parties presenting their case before three magistrates. The court will hear submissions from Impala and from the European Commission. The parties to the Sony BMG merger, Sony Corp. and Bertelsmann, will also address the court.

Brussels-based Impala lodged the appeal in November 2004. Impala contends that the European Commission's decision to authorize last July the merger between Sony Music and BMG should not have been taken.

It argues that the EC did not fully take into account the implications of the merger on collective dominance, cultural diversity and market-access conditions. Impala contends that the Commission should have assessed the impact of the merger and should have taken into account the interest of competitors and citizens.

"The Commission did not take cultural diversity into account at all," said Patrick Zelnik, Impala vice president and president of Paris-based indie Naïve.

The three magistrates who hear the appeal will likely issue a decision within three to six months.

Should the court decide in favor of the EC, a status quo will prevail. But if the court rules for Impala, the EC will have to review the process by which it handles competition cases, and the Sony BMG merger will be nullified. Sony BMG would then need to adjust operations and submit a new transaction to the EC.

"The consequences of such an event have really not been thought out," says Jacques Bourgeois, a partner at the Brussels office of law firm Akin Gump Strauss Hauer & Feld.

EC competition spokesman Jonathan Todd said the EC is confident its decision will stand up to any court challenge. "We conducted a thorough analysis and we scrupulously followed the correct procedures before making the final decision," he said.