EU Delays Universal-BMG Merger
EU regulators on Friday opened an antitrust probe of Universal Music Group's plans to buy BMG Music Publishing for about $2.1 billion, saying the deal could damage "the already concentrated music publishing market."
Officials in Brussels announced they would issue a final decision on whether to block or allow the deal by April 27.
BMG — owned by German media company Bertelsmann AG — has the rights to more than a million songs by recording artists such as Nelly, Maroon 5 and Coldplay, as well as classic hits by the Beach Boys, Barry Manilow and others.
Paris-based Vivendi SA's Universal Music Group is the world's largest music company. Its publishing arm controls the rights to songs by artists such as 50 Cent, Mary J. Blige and Chamillionaire.
If approved, the deal would combine the No. 3 and No. 4 music publishing catalogs, giving the Universal-BMG entity a 22-percent market share and moving it ahead of current market leader EMI.
European Union approval was the last hurdle for the deal, which was cleared by the Federal Trade Commission and the Justice Department in the United States last month.
The EU rarely blocks deals — but it can, and often does, demand that companies under investigation sell off units or make binding promises to change the way they do business.
New York-based Universal said it believed that the EU would eventually bless the deal.
"We understand why, in the current environment, the European Commission has sought more time for its review," it said.
The company was referring to a July court ruling that said EU regulators were not careful enough when they cleared a 2004 deal between the music units of Sony Corp. and Bertelsmann AG. The Sony-BMG deal must now be re-examined.
Bertelsmann spokeswoman Liz Younge refused to comment.
But independent record label group Impala said its 2,500 members believed that regulators will identify more problems and refuse to clear the deal.
"These mergers are bad news for artists and music," said Martin Mills, chairman of Impala and British record company Beggars Group.
The European Commission said its initial investigation raised "serious" concerns that the deal could erode fair competition in the music publishing market.
"Universal is the strongest player in music recording. After the proposed merger it would become also the largest music publisher in the European Economic Area," it said in a notice published on the Web site of the EU executive.
Regulators said their probe will focus on whether Universal's leading position and a shrinking number of players in the market would have "a negative impact" on fees for publishing rights or conditions for European song writers.
Five companies — Universal, BMG, EMI, Warner and Sony — control most of recorded music and music publishing in Europe, they said.
The Commission is under pressure to look closely at the record industry after the EU's second-highest court overturned regulatory approval of the Sony-BMG deal, saying EU officials had not done enough to show there was no monopoly in the recording industry before the deal or that there would not be one afterward.
That ruling sent record companies into a flurry, forcing EMI and Warner, a unit of Time Warner Inc., to suspend takeover talks as analysts said it raised the stakes for similar combinations.