Confirming information first revealed on Billboard.biz, the European Commission announced today (Feb. 12) that its competition department is to open an in-depth probe into the proposed merger of the music units of Sony Corp. and Bertelsmann. The deadline for a decision has been set for June 22.
The EC says it has decided to investigate whether the deal “might create or strengthen a collective dominant position between the remaining four major record companies — Universal, Sony BMG, Warner and EMI — in the recording market.”
The body notes that if the merger closes, the remaining four major players would hold approximately 80% of the recording market, both on a European level and in most national markets in the European Economic Area. Sony-BMG and Universal together would account for approximately half of the recorded music market.
European independent labels body Impala has raised concern that the Sony BMG entity could leverage Bertelsmann’s other media assets, resulting in unfair competition. The EC says that if Sony BMG gets preferential treatment on Bertelsmann-owned media outlets, it could have the effect of “foreclosing competing record companies from equal access … in some countries.”
The EC notes that third parties have also expressed concern that the combined record company could receive preferential treatment from Sony’s soon-to-launch online music service Sony Connect.
In a statement, Sony Music says, “We believe that the Sony BMG joint venture is a pro-competitive response to the challenges faced by the recorded music industry. We recognize, though, that the industry is complex and that the Commission staff, with whom we are in close and regular contact, need more time to complete their review. We will continue to give every assistance to the European Commission during the Phase II process. We remain confident that, after completing its review, the European Commission will approve the transaction.”
BMG says, “We have been notified that our application to the European Commission has moved into the Phase II process. We are not surprised by that step, and we feel well prepared. We look forward to cooperating with the regulatory authorities over the coming weeks and months.”
Impala welcomed today’s decision. In a statement, the organization says, “This investigation will give the independents and Impala more opportunity to provide further evidence on the horizontal and vertical issues that concern the Commission.” It adds, “The independents are concerned about the negative impact that the merger would have across the whole value chain, from record companies to publishers to artists, performers, employees, managers, retailers, composers, writers, collecting societies and of course, consumers.”
A senior source at one of the two majors involved in the deal tells Billboard.biz that the EC’s decision was anticipated, but that both companies are focusing on day-to-day business. “This process is going to take at least four months,” says the source. “The best we can do for our artists and for us is to concentrate on our job and do the best we can.”