INDEPENDENT LABELS MAY SUE
TO BLOCK MERGER

Lawyers for European independent record label consortium Impala and others joining under the banner “Opponents of Sony BMG” are due to give detailed counsel this week as to the group's legal options in trying to stop the merger recently approved by Mario Monti’s European Commission, according to the Financial Times.

Impala has threatened repeatedly to attempt to block the merger by lawsuit if the EC failed to stop it, but it remains unclear whether such a move will actually materialize. The Opponents group is said to be awaiting EC disclosure of complete details surrounding its approval of the merger before it decides on a course of action.

The EC last week said it lacked sufficient evidence to block the Sony BMG deal.

If they choose to proceed, the Opponents group will likely either try to get an injunction from the European Union’s Court of First Instance barring the merger from proceeding or and interim ruling suspending the merger until the EC performs another review of its impact, the paper says.

Those close to the Opponents group see three arguments on which to base their objections to the merger, the paper says: One, the EC did not fully consider the impact of the deal on the new release market, of which two-thirds would be controlled by Sony BMG and Universal Music Group; two, they contend the licensing market would also become unfairly dominated; and three, the opponents contend the EC has contradicted itself on the issue of pricing.

EC rules allow a two-and-a-half month window for challenges to its decisions to be issued. One Impala legal advisor told the FT, “We feel the Commission would like the decision to be challenged and tested. Even if the deal is completed, it can be challenged if evidence is shown of market dominance by the new entity.”