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MERGER MANIA HITS THE HOMESTRETCH

Vivendi-Seagram, AOL-Time Warner, Warner Music Group-EMI Await Consummation
Active antitrust regulatory bodies in the United States and Europe hold the key to three major multibillion-dollar mergers that, if passed, will significantly reshape the global media landscape. At issue simultaneously are the proposed mergers of America Online-Time Warner, Warner Music Group-EMI and Seagram-Vivendi.

The U.S.' Federal Trade Commission and Federal Communications Commission, the European Union's European Commission and France's CSA have been investigating the plausibility of these planned mega-mergers, trying to determine whether such alliances would create an unfair market dominance.

The Seagram-Vivendi-Canal Plus merger looks to be on the fast track, having already received CSA clearance, while the EC is expected to follow suit after it receives the information it requested from the companies.

The EC on Tuesday (8/22) sent a formal statement to Time Warner and AOL setting out its competition concerns. A similar "statement of objections" was sent to EMI and Time Warner, parent of the Warner Music Group, over the planned music operations' joint venture.

The EC said in June it was opening a four-month in-depth probe into both deals. The sending of a document setting out the EC's concerns is a standard step in a second-stage review. The Commission spokesman had no details about the contents of the statements. The deadlines for ruling on the deals are Oct. 18 (WMG-EMI) and Oct. 24 (AOL-TW).

At issue is the EC's fear that a WMG-EMI deal could lead to an oligopoly of four firms dominating the West European recorded music market. It said its detailed investigation was also likely to focus on music publishing and digital delivery of music via the Internet. In announcing the AOL-Time Warner probe, the commission said it would "examine the effects of the transaction on the emerging business of music distribution over the Internet and on the markets for Internet dial-up access and paid-for content."

"We are not surprised by any of the issues identified in the document, and at first reading we do not believe that these cause substantial obstacles to clearance," EMI said. "We remain confident that we are on track to close by the end of this year, as expected."

EMI said it would continue its dialogue with the commission and added that it saw nothing in the statement of objections "which would require us to make undertakingsthat would materially undermine the commercial rationale of the deal."

One of the commission's main concerns was whether WMG and EMI, through the joint venture, would establish a vertical exclusive tie with AOL for music distribution over the Internet.

U.S. antitrust enforcers may also recommend a challenge to the WMG-EMI merger, fearing such a venture would create a dominant force in music recording, publishing and Internet delivery.

"The deal is going through its normal regulatory process," said TW spokesman Edward Adler. "We are in discussions with the regulatory authorities. The deal is on track to close by the end of the year."

FTC lawyers are concerned the venture—which would combine the top two music publishing units—could lead to higher licensing fees for songs. Together, WEMI would control the lion's share of popular songs from the '60s and '70s.

Insiders said the most-talked-about concession to the regulatory bodies would be the selling of Warner/Chappell, WMG's publishing unit. Publishing insiders, however, said that a sale of a designated number of copyrights by a merged EMI-Warner/Chappell could solve regulatory hurdles.

Meanwhile, executives from AOL-Time Warner have had to defend themselves to the FCC against charges of trying to assemble an entertainment colossus that's simply too big for its own good. A majority of the five FCC commissioners could vote to block the deal or impose conditions on it. General Electric's NBC and Walt Disney's ABC want the FCC to carve AOL-Time Warner into two firms—one that would own content and one that would own cable lines.

Sticking points have been whether the combined company would want to open Time Warner's cable lines to rival Internet service providers, as well as open standards for instant messaging. Competitors want access to the tens of millions of people who use AOL's instant messaging service, and some FCC commissioners have indicated they felt the same way.

Most recently, insiders have said the FTC, which is close to completing its review of the proposed merger, probably won't force AOL to open its instant-messaging service to rival providers as a condition for approving AOL's merger with Time Warner. However, AOL's Instant Messenger still could be pried open by the FCC, which also must approve the merger. But some government officials say it's unclear whether the FCC has the authority to regulate a feature that might be deemed an ''information service'' rather than a "telecommunications service."

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