European Commission To Probe Sony-BMG Joint Venture

by Ulrika Lomas, for LawAndTax-News.com, Brussels

06 March 2007

The European Commission announced last week that it has decided to open an in-depth investigation into the merger of the global recorded music businesses of Germany’s Bertelsmann AG and Japan’s Sony Corp.

An earlier Commission decision to approve the merger in July 2004 was annulled by the European Court of First Instance (CFI) on 13th July 2006.

According to the EC, the in-depth inquiry will permit a thorough analysis of the complex information required in order for the Commission to ascertain whether or not the merger strengthens or creates a dominant position in these relatively concentrated markets.

The opening of an in-depth investigation does not prejudge its final result.

The Commission now has four months, until 2nd July 2007, to reach a final decision on whether to approve or veto the merger.

The transaction comprises the creation of the recorded music joint venture Sony-BMG, into which Bertelsmann contributed the worldwide recorded music business of its wholly-owned subsidiary Bertelsmann Media Group, with its labels Arista, Jive, Zomba and RCA. Sony contributed its worldwide - with the exception of Japan - recorded music business, which had been operated by Sony Music Entertainment, and whose labels include Columbia, Epic and Sony Classical.

The Commission initially authorised the creation of Sony-BMG, finding that the merger did not create or reinforce collective market power on the part of the music majors (Universal, Sony-BMG, Warner and EMI).

However, in its 13th July 2006 ruling on the case, the Court of First Instance stated that it considered the evidence relied upon by the Commission as insufficient to explain the decision, and therefore annulled it. As a result, the Commission is re-assessing the transaction.

The EC is also currently probing a proposed alliance between BMG and Universal.

In December 2006, the Commission announced that it would scrutinise the planned acquisition of the music publishing business of BMG by Universal.

The Commission’s initial market investigation into the matter indicated that the proposed merger would raise serious doubts as regards adverse effects on competition in the "already concentrated music publishing market".

The Commission has until 27 April 2007 to take a final decision on the matter.

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