Brussels, 11/10/2000 (Agence Europe) - The European Commission approved the proposal of merger between the American groups, America Online Inc (AOL) and Time Warner, as AOL has offered to sever all structural links with the German media group, Bertelsmann, the largest European media group. The proposed move was the subject of a detailed investigation by EU competition authorities whose main fear was that the new entity would hold a dominant position on the emergent markets of on-line delivery of music over the Internet and software-based music players.
Time Warner is one of the world's biggest media and entertainment companies while AOL is the main provider of Internet access in the United States and the only company with a foothold throughout Europe, where it mainly operates via two joint companies: AOL Europe, held equally with German Bertelsmann, and AOL Compuserve France, jointly held with Bertelsmann, on one hand, and Cegetel and Canal Plus, subsidiaries of French Vivendi, on the other. The merger between the two companies would give rise to the first Internet vertically-integrated content provider, distributing Time Warner branded content (music, news, films, etc.) through AOL's Internet distribution network. Given the links between AOL and Bertelsmann, the new entity would also have had a privileged access to the German group's large musical library and, because of this, would have the possibility of controlling the main source of musical publishing rights in Europe. In order to raise these competition concerns the parties have proposed to reduce the structural links existing between AOL and Bertelsmann, which have set in place a mechanism allowing Bertelsmann to gradually pull out of AOL Europe and AOL Compuserve. The parties are also taking "interim measures to ensure that the relationships between AOL and Bertelsmann will be kept at arm's length until Bertelsmann's exit has been completed".
These concessions had already been proposed during the first phase of the investigation, but had not been considered sufficient given the existence, at the time, of a draft merger between Warner Music, subsidiary of Time Warner, and the EMI Group. This move, which was the subject of a separate inquiry, also posed competition problems in the field of recorded music, musical publishing and the transmission of music via the Internet. Time Warner and EMI's decision to withdraw their project (EUROPE of 6 October, p.15), together with the commitments by the parties towards Bertelsmann, favoured the positive decision by European authorities since, under these circumstances, AOL/TW "would not have the critical mass in terms of music publishing rights to dominate the market" of on-line music distribution and music players.