European Commission examines UMG-EMI merger

Regulatory body raises anti-competitive concerns

The European Commission’s investigation of the proposed merger of Universal Music Group and EMI Music’s label interests has moved into its second stage, with regulators acknowledging anti-competitive concerns.

The European regulatory body, which has been exploring the transaction since February, has 90 working days to sift the deal, and set Aug. 8 as the deadline to make a final decision.

Though the EC did not reject the combination of the two major music firms outright, a strongly worded statement issue Friday indicated that high hurdles would have to be cleared before approval.

Most observers have opined that UMG, presently the largest among the remaining major label firms, would have to make significant divestitures to ensure approval of the splicing by overseas regulators.

Commission vp in charge of competition policy Joaquin Almunia said, “The proposed acquisition could reduce competition in the recorded music market to the detriment of European consumers. The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions.”

The commission added that the UMG-EMI entity “would be almost twice the size of the next largest player in the (European Economic Area and) would not appear to be sufficiently constrained by the remaining competitors on the market, by its customers buyer power, and/or by the threat of illegal music consumption (so-called “piracy”).”

The Federal Trade Commission is currently weighing the deal in the U.S.

UMG said in a statement, “Phase II was always expected; we recognize that the Commission needs time to fully review this transaction. We will continue to co-operate fully with them and look forward to a successful resolution of the process.”

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