WMG/EMI MERGER IN HOT WATER?

Just a day after EMI Group Chairman Eric Nicoli, EMI Recorded Music Worldwide President/CEO Ken Berry, Time Warner President Richard Parsons and Warner Music Group Chairman Roger Ames met with the European Commission in Brussels to respond to the EC's statement of objections to the two company's proposed merger, there is increased chatter WEMI may well be in jeopardy.

The European Commission is keeping itself busy by reportedly sharing their findings with the U.S. Federal Trade Commission, which is focusing on the America Online/Time Warner merger, as well as trying to agree on what to have for lunch since its 20 members come from 15 countries.

The EC's objections apparently now go beyond the publishing companies joining forces. Inside sources say the Commission, which is the competition watchdog for the European Union, is also concerned that a playing field with just four major labels could lead to higher prices for consumers, new independent companies not being able to enter the game and other anti-competitive actions. This means that selling off Time Warner's Warner/Chappell pubbery, as rumormongered, might not be enough to satisfy the Commission.

The EC is obviously more concerned with the EMI/TW deal because the combined companies will be traded on the London Stock exchange, with EMI owning half the combined entity. The FTC's concern is on the impact a joined AOL/TW could have on controlling high speed Internet access and distribution of digital content.

Commenting on the EMI/TW deal, other sources said that the companies feel that they have a very strong argument in favor of the merger, noting that the EC has never turned down a merger that would result in an industry going from five to four players.

(Additional reporting by David Simutis)