The European Commission will open an in-depth investigation into Universal Music Group's planned takeover of BMG Music Publishing, inside sources confirmed to Billboard.biz today (Nov. 29).
The four-month, second stage review of the acquisition was indicated by the investigating team dealing with the case within the Commission's merger task force.
"The Commission will open a second phase inquiry, and this will probably take place on Dec. 8," one source said. "However, the opening of the inquiry does not in itself prejudice the final outcome of the inquiry."
The Commission -- the European Union's antitrust authority -- launches second phase merger investigations if competition concerns cannot be resolved during the initial, one-month first-phase inquiry.
The official Commission language always refers to "serious doubts" it might have about the effect on competition, with consumer choice or prices. But this is taken to mean that Brussels simply has not had enough time to fully understand the case at hand.
"This is not surprising simply because of the complexity of the case," one anti-trust attorney said. "The Commission needs to gather all sorts of data about the publishing market from various different sources, analyze it and take a decision. That would be almost impossible in just one month. It's easier to simply say they have 'serious doubts' and then do a proper inquiry."
Earlier this month, Vivendi, the owner of Universal Music Publishing Group, formally asked the Commission to clear its €1.63 billion ($2.1 billion) takeover of BMG Music Publishing.
The Commission has already sent out detailed questionnaires to various key actors in the music industry, from the major labels to the other publishing majors, as well as groups like the IFPI, independents' trade body Impala and groups representing collecting societies.
The last investigation of Europe's music publishing market took place in 2000, when the Commission was asked to rule on the abortive merger between Warner and EMI. The 2004 merger between Sony and BMG pointedly did not include their respective publishing businesses. Since the 2000 investigation, the market has changed considerably, notably thanks to the advent of digital downloads.
The investigation also comes at a sensitive political time for the Commission's competition services. It comes just four months after the Court of First Instance, the EU's second-highest court, annulled the BMG merger with Sony when it upheld an appeal that the Commission had used sloppy and cursory analyses when it approved it.
Many observers expect the Commission to conduct a thorough investigation to show it has learnt the lessons of the ruling -- even if the final outcome is the same. "The second phase inquiry is entirely consistent with what is going on within the Commission, and the current political climate after the court ruling," an industry source said. "They have to appear purer than Caesar's wife."
BMG and Universal each have around 11% of the market. If approved, they will have a 22% combined market share, about two points more than the market leader, EMI."
Vivendi beat off rivals EMI Music Publishing and Warner/Chappell Music in September to purchase BMG Music Publishing, whose archive of more than 1 million songs includes works by Coldplay, Britney Spears and Justin Timberlake. BMG Music Publishing is expected to complement rather than overlap the Universal catalog, which includes songs by U2 and Elton John.