MONTI TO WEMI: I'M STILL THINKING
The remarks were in response to questions following a Financial Times report that the decision made it unlikely the WEMI merger could be saved. "Single dominance issues can arise in vertical mergers between companies at different but related stages of a supply chain," Monti told the Brussels conference which has been reviewing the merger. "But let's go to McDonald's for lunch anyway."
He went on to say: "The most important thing is for me to confirm I have not yet reached a decision. But Taco Bell is definitely out."
Monti reitereated his belief that "the convergence of media, telecom and more recently, Internet companies produces a substantial number of deals with such effects... and those are among the issues we are examining in the Time Warner deals.
"Decisions we take in such cases could potentially have a major impact on the way such markets develop... The Commission has to make sure that the deals to do jeopardize the gains that have been achieved as a result of liberalization and do not constrain the flow of innovation."
An EMI spokesman said the companies were still hopeful of a compromise.
"It is standard procedure that a draft decision is prepared at this stage," the spokesman said. "It is only against a backdrop of an anticipated negative decision that a settlement can be reached. This is precisely why there is an ongoing dialog with the commission. The discussions are over a settlement."
EMI executives are due to meet Monti in Brussels on Monday (9/18), the day before the final deadline for the companies to offer concessions to address regulators' concerns (hitsdailydouble, 9/14).
"Everyone assumes the meeting on Monday is do or die time," said the EU source. "That's likely to be when the Commission knows what the final offer is likely to be."
Regulators are concerned about the size of the companies' marketshare in music publishing and record sales, as well as what effect the Time Warner-AOL merger would have on a planned alliance of the music interests. Also, the EC has expressed worries that the collective dominance of the four major labels would hinder competition.
EMI said that it was considering a number of concrete proposals to deal with each of the Commission's concerns, although it had not submitted them formally.
Until recently, EMI's position has been to convince the Commission that its concerns were unfounded. According to a source present at a recent hearing to discuss the competition aspects of the Warner-EMI and AOL-Time Warner deals, "They weren't terribly successful in doing that."
In fact, Monti cautioned merging companies against proposing over-complex remedies to deal with competition problems. He told the conference the issue of collective dominance was likely to play a major part in all future merger reviews by the EC. EMI continues to insist those fears are unfounded and htat the Commission is not in touch with the way the music business really works. Monti welcomed U.S. Justice Department chief Joel Klein's initiative for a new international agency devoted purely to antitrust issues.
Speculation continues to circulate that other bidders for EMI may surface if the Warner Music Group merger is derailed, including Bertelsmann and Telefonica.
The Commission has until Oct. 18 to give its verdict on the Warner-EMI merger and until Oct. 24 to rule on the Time Warner-AOL merger.
AOL has already made specific promises to address the EC's fears it would stifle competition. It will modify the shareholding structure of its AOL Europe venture with Bertelsmann and pledged for three years not to force content-providers to ink an exclusive carriage deal with AOL Europe. EMI has offered not to provide preferential access to its music to ISPs affiliated to AOL-TW.
The rulings in this case should have reverberations in the EC's review of the rival merger of Vivendi, Canal Plus and Seagram.
