TW, EMI offer changes to European Commission

Reduced competition continues to be a concern

BRUSSELS – As the clock ticked down on the midnight Tuesday deadline, Time Warner and EMI have apparently made substantial concessions, including proposing to sell some record labels, in a last-ditch bid to win European Commission approval for their joint venture.

Time Warner and EMI haven’t gone public on what they are offering, but it apparently involves selling some record labels in Denmark, France and Spain, as well as a major overhaul of their distribution businesses, which will see the companies abandoning the manufacturing of CDs.

They have also apparently agreed to respect prices set for music copyrights by national collecting societies, restructure their distribution businesses and alter their arrangements for producing compilation albums in return for the joint venture being approved.

EMI said that “notwithstanding these remedies, EMI continues to believe that the economics of the combination remain attractive and will deliver significant value to shareholders.”

These remedies, however, do not address the core antitrust issue facing the EC: competition in the music market would be reduced from five to four players.

The commission, the antitrust watchdog for the 15-nation European Union, is concerned the deal, combined with the planned AOL/Time Warner merger, could give the new groups dominance over the market for music and entertainment delivered over the Internet.

However, while the EC has reportedly drafted a veto of the Time Warner/EMI deal, observers believe that this is largely a negotiating tactic to force the two companies to deliver more convincing remedies than are currently on offer. Commission officials said on Tuesday this was a normal procedural step and that the companies still had time to offer concessions.

EC competition commissioner Mario Monti is looking to ensure that the merger doesn’t foreclose lucrative Internet markets to new entrants and damage customer choice.

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