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EUROPEAN COMMISSION AGAIN MULLING SONY-BMG
Mid-July Ruling Expected; “Formal Charges” This Month?
The new July 22 deadline for the European Commission to approve or block the proposed merger of Sony Music and BMG means the clock is ticking again, and the commissioners are busying themselves to beat it.

According to Financial Times and Wall Street Journal reports, the EC has received the additional information it requested from Sony and BMG, which included answers to questions regarding copyrights, contracts and licensing, as well as other facets of the companies’ recording and publishing businesses.

With that information in hand, EC chief Mario Monti and his commissioners are now set to prepare “formal charges” against the tie-up, which would list any objections the proposed 50-50 joint venture. The Financial Times says the EC hopes to have completed the charges by May 19, after which it would convene a “devil’s advocate” panel to review arguments for any objections before forwarding them to Sony and BMG.

One of the EC’s main concerns regarding the merger is said to be the reduction in major companies from five to four, which could lead to “tacet collusion” among those remaining and result in higher prices to consumers. That concept, along with marketshare concentration, has been among objections the EC has had to previous unsuccessful merger attempts. This time, however, issues related to vertical integration—as when a company both produces and sells a product, or, say, produces and sells both music and the devices to play it on—may become important areas of debate.

The Financial Times maintains that many close to the proceedings believe the deal will be approved with certain conditions. In prior cases, “behavioral commitments” such as promises not to shut out competitors, have served to overcome vertical integration concerns.

Divestments in certain markets where concentration is a problem could also remedy certain objections, the paper says.

European Indie-label group Impala has objected strenuously to the Sony-BMG deal before the EC and remains hopeful it will be blocked. The group will reportedly also move to block it on appeal if the EC initially approves it.

Meanwhile, the other majors—UMG, WMG and EMI—are understood to have voiced their own objections to the deal.
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