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Universal Music Group was cleared Tuesday to take over BMG Music Publishing when the European Commission gave the green light after a five-month investigation into the €1.6 billion ($2.1 billion) merger.
The European Commission — the European Union’s antitrust authority — said Tuesday that Universal had responded to initial “serious doubts” about the proposed merger by offering to sell off the rights of key labels in the music giant’s roster. The eventual concessions would include the sale of Rondor U.K., Zomba U.K., BBC Music, 19 Songs, 19 Music as well as a European license for the Zomba U.S. catalog.
“The proposed merger, as initially notified, raised serious doubts as regards adverse effects on competition in the market for music publishing rights for online applications,” the commission said. “However, the commission’s investigation found that these concerns would be removed by the remedies package proposed by the parties concerning the divestiture of a number of publishing catalogs.”
EU competition commissioner Neelie Kroes said the concessions were vital in an environment where digital music had the potential to change the face of the European music industry. “I am satisfied that the significant remedies will keep these markets competitive and ensure that consumers will not be harmed by the merger,” she said.
The decision was welcomed by Universal. “This is an historic moment for us as we combine the best creative and strategic assets of these two very accomplished publishing businesses,” UMG chairman and CEO Doug Morris said.
UMG president and COO Zach Horowitz said the merger would create a publishing business “better suited to serve songwriters, composers and business partners in this challenging marketplace.”
The merger company will operate under the Universal Music Publishing Group brand and will be led by David Renzer, current chairman and CEO. Renzer will continue to be based in Los Angeles and report to Horowitz.
Brussels-based independents trade group Impala welcomed the news that Universal was forced to make concessions. “The decision sends a clear message to all the majors that mergers without concessions will not be permitted,” Impala said. But the trade association also threatened a legal challenge, saying it “reserves the right to seek a reversal and stay of the decision on both procedural and substantive grounds if, after consultation with its members, it concludes the remedies are insufficient.”
EU clearance is the last regulatory hurdle for the takeover, which was cleared in November in the U.S. by the Federal Trade Commission. Vivendi beat rivals EMI Group and WMG in September to purchase BMG Music Publishing, where an archive of more than 1 million songs includes Coldplay, Britney Spears and Justin Timberlake. Universal’s catalog includes such artists as U2 and Elton John.
The commission’s investigation found no competition concerns would arise from the merger where the copyrights are still administered by the collecting societies, who usually charge uniform tariffs for the complete administered repertoire.
However, in the field of online rights, publishers recently have started to withdraw their respective rights for Anglo-American song repertoires from the traditional collecting societies system. They have started to transfer their rights to selected collecting societies acting as agents for individual publishers and granting Europe-wide licenses. The market investigation has shown that, following these withdrawals, pricing power has shifted from the collecting societies to the publishers.
Although the competition concerns only relate to online rights, the commitments cover the complete range of copyrights, which includes mechanical, performance, synchronization and print rights.
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