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Main >> News Listing >> June 2004 >> Article ID 5168
 Europe Hears Objections to Proposed Music Merger*Xtina Ment. | Type: Internet Article |
| | Europe Hears Objections to Proposed Music Merger | Jun 16, 2004 | by Nicola Clark and Paul Meller
Summary:
...The proposed merger of Sony Music and the BMG unit of Bertelsmann would create the world's second-largest recorded music company after Universal Music, bringing together artists like Britney Spears, Christina Aguilera, Beyoncé Knowles and Marc Anthony.... |
BRUSSELS, June 15 - The European Union's lengthy review of the proposed merger of the music units of Sony and Bertelsmann entered its final phase on Tuesday, as a panel of antitrust regulators concluded two days of closed hearings.
The panel spent Monday listening to the companies argue for approval of the merger, and Tuesday listening to representatives of independent record companies speak against it.
"Discussions at the oral hearing were constructive," Bertelsmann said in a statement afterward.
The proposed merger of Sony Music and the BMG unit of Bertelsmann would create the world's second-largest recorded music company after Universal Music, bringing together artists like Britney Spears, Christina Aguilera, Beyoncé Knowles and Marc Anthony.
The companies requested the hearing after the European Commission, the executive arm of the union, objected to the merger last month.
In a 60-page analysis that focused largely on CD prices in Europe, the commission found that prices tended to move up and down together, a phenomenon that the regulators who drafted the analysis said was proof that the five major companies - Universal Music, Sony Music, Warner Music, BMG and the EMI Group - exercised "collective dominance."
Executives from Sony and Bertelsmann declined to discuss details of what was said at the hearings; so did others in attendance, including executives from Apple Computer, which operates the iTunes online music service, and Impala, a Brussels-based trade association representing about 1,800 independent music companies across Europe. Officials from 13 national competition regulators, including the Federal Trade Commission, were also present at the hearings.
Michel Lambot, chairman of Impala, described the tone of the hearings as courteous. Impala said last week that it welcomed the commission's "very strong" objections to the merger and that they reflected the concerns of independent labels that a merger of two of the five leading companies would "disproportionately aggravate" an existing problem of collective dominance.
"We hope that the commission will stand by its position and that the merger will be blocked," Mr. Lambot said on Tuesday.
The concept of collective dominance is central to the commission's objections to the Sony-BMG merger. People who have read the objections said that most of the document concerned evidence that the five giants, with 80 percent of the world market, were able to collude tacitly to set prices for CD's.
One person who has read it said that the document cited a comparison of the Led Zeppelin compilation album "Early Days and Latter Days," released by Warner Music, and "The Eminem Show," a rap album released by Universal Music. The two CD's would be expected to appeal to different audiences - for Led Zeppelin, classic-rock fans in their 30's and 40's; for Eminem, teenagers and young adults in their 20's.
"The spending power of these two consumer groups is very different," the person who has read the document said, paraphrasing the regulators' argument. "If prices responded to demand, then surely an album aimed at kids would be cheaper than one aimed at wealthier, older listeners."
According to a music executive who attended the hearings, Sony and Bertelsmann told the panel that the major record labels did not have the power to manipulate prices. They offered data showing that CD prices in Europe fell more than 5 percent from 1999 to 2002, the executive said, and they argued that large retailers, including supermarkets, had gained leverage over the music labels when it came to setting prices.
Now that the hearings are concluded, the commission's economists and lawyers will review the case with members of the staff of the union's commissioner of competition, Mario Monti. The review is intended to assure that if a decision is made to block the merger, it can withstand a court challenge.
In 2002, the European Court of First Instance in Luxembourg overturned the commission's decision to block a merger of two British travel companies, Airtours and First Choice Holidays, saying that the commission failed to show that the deal would create a situation of collective dominance among European tour operators.
If the commission decides to stand by its objections to the music deal, Sony and Bertelsmann will probably be given an opportunity to propose changes to address regulatory concerns. The commission has until July 22 to make its decision on the merger. |
 Source: New York Times | |
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