Sony, Bertelsmann appeal EU merger ruling

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BRUSSELS -- Sony and Bertelsmann on Thursday appealed against the European Union court decision last July that annulled their 2004 music merger.

The appeal was lodged at the EU's top court, the Luxembourg-based Court of Justice, the only body capable of overturning the July ruling made by the EU's second-highest court, the European Court of First Instance.

In a statement, Bertelsmann and Sony confirmed their joint appeal. "They did so on the grounds that the European Commission's 2004 Decision to clear the Sony-BMG recorded music joint venture was correctly decided on both the law and the facts," the statement said.

In June 2004, the EC unconditionally cleared the plans by the two media giants to merge their music divisions, Sony Music and BMG.

Independent music labels, gathered under the umbrella of Impala, challenged the case at the Court of First Instance, arguing that the EC failed to conduct a thorough investigation of the antitrust implications before clearing the merger.

The merger made Sony-BMG the world's second largest music company, behind Vivendi's Universal Music Group, but Impala said it would muscle out smaller labels and prevent newcomers from breaking into the market. It said the EC had only made a cursory examination of the potential impact it might have, and failed in its responsibility to study the effect on consumers.

In a surprise move, the judges agreed in July that the EC decision had been "riddled with errors" and annulled it. They said the EC failed to show that at the time the then-five music majors were not colluding over market prices or that they would not afterwards.

The Court of First Instance also slammed the EC for failing to demonstrate why it had turned its back on initial findings, in May 2004, that suggested it agreed there was tacit price collusion among the major music companies to raise CD prices and cut consumer choice.

After the court annulment, the EC immediately announced it would re-examine the deal, meaning that Sony and BMG have to re-submit their plans for another investigation. It is unclear whether the new bid for a merger will be cleared as the first one was two years ago.

But the court decision effectively put on ice any other plans by the music majors for further consolidation. Merger initiatives by EMI Group and Warner Music have been shelved.
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