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“We have proved that, by acting collectively, we can challenge the unchallengeable.”
——Impala President Patrick Zelnik

ON SECOND THOUGHT... EURO COURT ANNULS SONY BMG MERGER

Surprise Ruling Could Dissolve the Merger and End the EMI-WMG Mating Dance
In an unprecedented ruling that could dramatically alter the landscape of the music industry, a European Union court today overruled the European Commission’s green-lighting of the deal that merged Sony Music and BMG.

The surprise ruling could lead to the dissolution of Sony BMG—which would be a colossal inconvenience for the two companies, to say the least—and it throws cold water on the hot-and-heavy courtship of Warner Music by EMI. For the EU full release, click here.

The Court of First Instance, acting in response to a challenge to the merger that had been issued by indie label group Impala, concluded that the EC didn’t thoroughly scrutinize the issue of monopoly when it OK’d the merger in July 2004, nor did it prove that consumers would not be harmed via fewer choices and higher prices.

Loving the metaphorical smell of napalm in the morning, Impala President Patrick Zelnik   boasted to Reuters, “We have proved that, by acting collectively, we can challenge the unchallengeable.” 

“Today's judgment does not affect the validity of the Sony BMG joint venture, which has been up and running since August 2004,” read an “act like nothing’s wrong” statement from Bertelsmann.

It’s a case of déjà vu for EMI and WMG, which were dissuaded from hooking up in 2000 after the EU—goaded by Impala—stated that reducing the Big Five to the Big Four could reduce competition and lead to higher prices and less choice for consumers. Queried by the AP about the annulment of the Sony BMG marriage, EMI rationalized that “detailed study” would be needed to determine whether the ruling has implications for the joining together of EMI and WMG.

The EC has two months to either appeal the court’s ruling or re-examine the Sony BMG deal based on the court's instructions and the current market conditions. Either way, the music industry—apart from UMG, at least—will be in a state of prolonged anxiety until the issue is resolved, months from now.

Whoa.

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