Music giants’ merger under renewed investigation

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The Commission’s anti-trust department has re-opened in-depth investigations into the merger of Sony and Bertelsmann BMG, which has created one of the largest music companies in the world.

The investigation, announced by the Commission on 1 March 2007, is already the second one into a merger that reduced the number of companies controlling the global market for recorded music from five to only four. The 2004 deal led to the creation of Sony BMG Music Entertainment, which sells one of three CDs bought worldwide. 

Initially, the merger of the music branches of industry giants Sony and Bertelsmann was cleared by the Commission, following a five-month investigation, finding that it “did not have sufficiently strong evidence to oppose the deal”. The clearance was contested, however, by the Independent Music Publishers and Labels Association (Impala), which took the Commission to the European Court of Justice over it. 

On 13 July 2006, the Court annulled the decision authorising the merger, arguing that the Commission did not demonstrate sufficiently “either the non-existence of a collective dominant position before the concentration or the absence of a risk that such a position would be created as a result of the concentration”. 

Three years after the initial authorisation, the Commission has to examine again whether the merger threatens to strangle smaller competitors in a market with increasingly monopolistic structures. On 3 November 2006, the Commission received a prior notification from the Universal Music Group (owned by the French Vivendi group), which is currently in a bid to buy BMG, and that Warner Music is seeking to buy EMI. If these deals are concluded, they would reduce the number of major music companies to three. 

The Commission could ask for a change of the agreeement setting up Sony BMG Music Entertainment, or it could even void the deal. A decision must be taken before 4 July 2007. 

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