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SONY-BMG INQUIRY SUSPENDED

European Commission Wants More Information on Retail Power
The European Commission has suspended its investigation into the proposed Sony-BMG merger. After putting the inquiry on ice, Mario Monti and the EC sent out information requests from the two companies and those against the pact to evaluate if the deal is allowable under European Union competition rules.

The delay isn’t a roadblock, but it is a signal that the Commission hasn’t finished its analysis of what a combined Sony-BMG means. According to press reports, the EC hasn't yet subjected its case to internal scrutiny through a so-called "devil's advocate" panel.

Many EC information requests have dealt with the recent decline and changes in the record industry. Requests have reportedly been sent to music companies and retailers, as regulators investigate claims by Sony and BMG that the balance of power is shifting in favor of retailers. The Commission's other concerns are if the merger will impact other companies’ online music sales.

The European Union issued a statement Tuesday, clarifying its decision to pause the investigation. Said spokesman Tilman Lueder: "These are markets where we only have a few so-called majors which are active. If two of them merge, of course that requires careful assessment." Lueder said the requests concerned both music recording and publishing, "but of course the core of it is the music recording market." He also said that Sony and Bertelsmann welcomed the request for more information and the extension of the deadline, "because that gives everybody more time in assessing these complex deals."

Last Tuesday, Bertelsmann CEO Gunter Thielen said he expected the regulators in Brussels and Washington D.C. to give their approval for the deal by the end of September at the latest.

In February, the EC said it was subjecting the proposal to an in-depth, four month inquest, saying the joint venture “might create or strengthen a collective dominant position.” A new deadline has not been set by the EC; the original date to make a decision on allowing or rejecting the pact was June 22. The delay has been reported as taking about a month.

Though the deal excludes Sony’s Japanese business, BMG-Sony would be the second largest label in the world, behind Universal.

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