EC scrutinizes media merger

Commission plans lengthy investigation of TW/EMI deal

BRUSSELS — The European Commission is paying increasingly close attention to the rapid pace of consolidation in the media, technology and telecom sectors.

On Wednesday the Commission confirmed that it would subject the Time Warner/EMI merger to a full four-month antitrust investigation. On Monday, the Commission will announce whether it will put the AOL-Time Warner deal under the four-month microscope.

While EMI is confident that it will eventually win approval from Brussels, the merged company will control around 25% of the world market for recorded music. Four giant companies — Bertelsmann Music, Sony Music, Universal Music, and Time Warner/EMI — will, in effect, dominate the European market, with an 80% share between them.

Cracking down

European competition commissioner Mario Monti has vowed to crack down on the creation of oligopolies. On his first day in office last September, Monti blocked a merger between two tourism companies in the U.K. on those grounds.

In addition, the Commission is extremely sensitive to the possibility that, in today’s changing technological environment, media and telecom mergers may enable companies to gain control of key distribution gateways for accessing content. Even though these mergers and joint ventures may look harmless, the Commission fears that many have the potential to create competition bottlenecks.

For example, the Commission is investigating Microsoft’s investment in U.K. cabler Telewest. It is concerned that this could lead to Microsoft dominating the market for software for TV set-top boxes, and hence create just such a bottleneck in the digital TV market.

Note of concern

The Commission has confirmed that the issue of the control of the distribution of music over the Internet will be a major factor in its investigation of Time Warner/EMI.

The parallel merger of AOL and Time Warner seems set to deliver Time Warner/EMI with a dangerously powerful platform for delivering music into consumer’s homes over the Internet and over cable networks.

However, Roger Faxon, executive vice president of EMI, counters that “the Internet is creating even greater competitiveness. The very nature of the Internet makes our industry open to all comers, whether that be technology companies, Internet start-ups or artists who wish to market their own recordings”.

The other major issue of antitrust concern is Time Warner/EMI’s potential dominance in the music publishing sector.

Meanwhile, the Commission has confirmed that the Vivendi/Seagram merger will also face a review by its competition arm. Given the Commission’s heightened sensitivities in the media area, a long investigation cannot be ruled out, even though there are no obvious competition overlaps between the two companies.

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