EC to probe Universal-BMG Music merger

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BRUSSELS -- The European Commission confirmed Friday that it will open an in-depth investigation into Universal Music Group's planned takeover of BMG Music Publishing.

"The commission's initial market investigation indicates that the proposed merger would raise serious doubts as regards adverse effects on competition in the already concentrated music publishing market," the commission said in a statement. "The decision to open an in-depth inquiry does not prejudge the final result of the investigation."

The commission, the European Union's antitrust authority, now has 90 working days -- until April 27 -- to make a final decision.

The commission noted that both the recorded music market and the music publishing markets are dominated by the same five vertically integrated companies -- Universal, BMG, EMI, Warner and Sony.

It said that during its investigation, it will look at whether the leading position of Universal and the further concentration of the market structure would have a negative impact on fees for publishing rights or on conditions for songwriters in the EU. The commission added that it will also take into account the role and position of the collecting societies.

The investigation comes five months after the EU's second-highest court annulled the 2004 Sony-BMG merger. But Universal said in a statement that it remained confident that its deal would be cleared despite the court's blow to the commission's authority.

"Although we understand why, in the current environment, the European Commission has sought more time for its review, we believe, as we have always done, that the merger will be approved," Universal said. "We look forward to working with the commission over the next few months to complete the process."

The commission launches a second phase of merger investigations if competition concerns cannot be resolved during the initial, one-month first-phase inquiry. Last month, Vivendi, the owner of Universal Music Publishing Group, formally asked the commission to clear its €1.6 billion ($2.1 billion) takeover of BMG Music Publishing. BMG and Universal each have about 11% of the market. If approved, they will have a 22% combined market share, about two points more than current 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 a million songs includes Coldplay, Britney Spears and Justin Timberlake. BMG Music Publishing is expected to complement rather than overlap a Universal catalog that includes artists like U2 and Elton John.

The commission decision was welcomed by Impala, the lobbying group for independent music companies. Impala said that a consultation of its 3,500 members last month revealed "serious concerns about the impact of the merger on the independents and across the music market as a whole."

Concerns cited included "market power far greater than the new company's market share, further damage to competition in music publishing and recorded music, the strengthening of an existing collective dominance in publishing, and prejudice towards collecting societies as well as the online licensing and synchronization markets."

Impala noted that it had filed the complaint that led to the EU's Court of First Instance's July annulment of the Sony-BMG merger and promised to battle the Universal takeover effort just as fiercely.

Impala chairman and head of the Beggars Group Martin Mills said the issue for the Universal takeover was one of market access.

"One of our main concerns is the ability of the majors to leverage excessive market strength in recording and publishing as well as the crucial online market," he said. "We have also asked the commission to implement the Sony-BMG judgment as a matter of urgency. These mergers are bad news for artists and music."
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