Senate subcommittee outlines UMG issues

Letter to FTC poses concerns over EMI buy, but makes no recommendations

Universal Music Group’s proposed purchase of EMI Music’s label assets raises “significant competition issues,” according to a letter sent Friday to the Federal Trade Commission summarizing the Senate antitrust subcommittee’s findings on the deal.

However, subcommittee chairman Herb Kohl (D-Wisc.) and ranking member Mike Lee (R-Utah) made no recommendations for specific remedies, choosing instead to somewhat benignly offer a list of potential concerns.

The subcommittee’s no-fuss stance would appear to clear the way for relatively easy approval of the transaction by the FTC, which has been weighing the matter since late last year.

“In sum, we urge the commission to consider the issues…in determining whether Universal’s proposed acquisition of EMI will substantially injure competition in violation of antitrust laws,” the letter said. “The commission should consider whether this deal may help revive the declining EMI record labels to benefit the music industry and consumers. It should also carefully analyze the acquisition’s likely effects on the ability of new and innovative digital music services to enter the market, on competition for music sales and prices for consumers and on the welfare of independent labels and artists.”

Kohl and Lee led the eight-member panel’s June 21 hearing on the pending $1.9 billion purchase (Daily Variety, June 22). UMG CEO Lucian Grainge and EMI Group CEO Roger Faxon appeared in support of the transaction, while Warner Music Group director and ex-CEO Edgar Bronfman Jr. and Beggars Group CEO Martin Mills assailed the deal.

In the interim, UMG and EMI reps have huddled with European Commission regulators who have been weighing the deal overseas; late last month, the labels submitted a package of proposed remedies that included the sale of several overseas labels, including EMI’s flagship imprint Parlophone (Daily Variety, July 30). Those concessions are currently being market-tested abroad.

Only this week, U.S. indie trade org the American Assn. of Independent Music renewed calls for similarly large Stateside divestments.

While the Kohl-Lee missive noted that a combined Universal and EMI would control nearly 40% of U.S. market share, it made no calls for the selloff of any domestic holdings. Instead, the senators merely reiterated the key points made by opponents to the deal, without suggesting any draconian sell-offs, or even smaller divestments.

UMG — which came out swinging against A2IM’s call for a holdings sale — issued a sanguine statement about the senators’ letter.

“Since our proposed acquisition was announced, we have expected a thorough and rigorous review of UMG’s acquisition of EMI from regulators in the United States… Since this deal was announced, we have worked closely with the Federal Trade Commission to address many of these issues, and will continue to do so. Our investment in EMI will create more opportunities for new and established artists, expand music output and consumer choice and support new digital services. We remain confident of regulatory approval.”