EC puts the heat on UMG

BREAKING NEWS: Sources who have seen the European Commission’s statement of objections to UMG’s acquisition of EMI Music have told the Financial Times and Reuters that the EC may veto the deal unless Universal offers major concessions. The Commission has given Universal until today to reply to concerns set out in the 194-page statement of objections, which it sent last month. The EC reportedly said the deal was incompatible with the EU's internal market and would completely change the interaction between supply and demand in the music industry, while also rejecting UMG’s arguments that the threat from piracy and the bargaining clout exerted by iTunes, Amazon and other online music services would limit its power. The document suggested that "Universal will have to significantly reduce its market share." The statement further argues that UMG already extracts materially higher prices from digital distributors than rivals, and that buying EMI would allow it to raise digital music prices. The Commission disagreed with Universal’s assessment of its marketshare, which excludes music it distributes for indie labels. “We are preparing a detailed response to the Commission’s statement which will address the concerns outlined in this procedural document,” Universal said. “We will continue to work closely with the Commission and look forward to securing regulatory clearance." The company is expected to respond within days, setting the stage for a negotiation in which it may have to offer groundbreaking concessions about its future behavior in the digital market as well as any disposals regulators demand. One plan said to be under discussion would see it ensure that independent labels got the same financial terms from any new digital music service that Universal secures for itself. (7/3a)