Brussels, 02/03/2007 (Agence Europe) - On 1 March, the European Commission decided to open an in-depth investigation into the merger of the activities carried out globally in the recorded music sector by the German company Bertelsmann AG and the Japanese company Sony Corp, creating a joint company, Sony-BMG. The authorisation granted to this project by the Commission was cancelled by the Court of First Instance in July 2006 by request of IMPALA, the Independent Music Companies Association. The investigation which was decided upon on Thursday will aim to remedy the procedural problems identified by the Court.
In a press release, the president of IMPALA, Patrick Zelnik, stated: “The Commission will now be able to carry out the full cultural impact assessment it is obliged to do under the Treaty. We will also be urging the Commission to take into account the recent acknowledgement by Warner that concentration in music causes serious problems and needs serious solutions”.
It is worth noting that IMPALA's appeal to the Court prompted Warner to abandon its plans to take over EMI in 2006, until an agreement with the association is concluded. IMPALA remains closely involved in the Commission's analysis: “The independent music companies will play a vital role in helping the Commission 'market test' its data and conclusions”, the press release explains; if such tests were not to be carried out, this would have scuppered the first attempt at a merger. This investigation will also focus more on the online markets, and the impact of this on access to the various music markets for independent music companies. The previous analysis, which was overruled by the Court, is believed to have focused too much on the role of prices of various products and services. The Commission now has four months, or until 2 July 2007, to return a definitive decision authorising or banning the merger operation.
It is also worth noting that the Sony-BMG operation is up and running and active, pending the conclusions of the Commission. Bertelsmann's contribution covers the worldwide activities carried out in the field of recorded music by its wholly-owned subsidiary, Bertelsmann Media Group (“BMG”), which includes the labels Arista, Jive, Zomba and RCA. As for Sony, the company's contribution to the joint-venture is the inclusion of its worldwide activities - excepting Japan - carried out in the field of recorded music by Sony Music Entertainment, whose labels include Columbia, Epic and Sony Classical.
The assessment was carried out in virtue of the previous regulation on mergers (4064/89), which is applicable to all agreements signed prior to 1 May 2004, and which states that it must be determined whether a merger operation will create or reinforce a collective dominant position within the territory of the European Union in its configuration prior to 1 May 2004 (in other words, when there were 15 Member States), or a substantial portion thereof. The Commission will assess the operation in light of current market conditions, taking account of all developments which have come into play since 2004, particularly increased levels of on-line music sales. (cd)