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EU opens probe into merger of Universal, BMG

The proposed deal between the music giants is prompting antitrust concerns in Europe.

December 09, 2006|From the Associated Press

European regulators 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 said they would issue a final decision on whether to block the deal by April 27.

BMG -- owned by German media company Bertelsmann -- 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 other entertainers.

Universal Music Group, owned by Paris-based Vivendi, 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 them a 22% market share and putting them ahead of market leader EMI.

European Union approval was supposed to be the last hurdle for the deal, which was cleared in the U.S. by the Federal Trade Commission and the Justice Department last month.

The EU rarely blocks deals, but it often demands 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. The Sony-BMG deal must now be reexamined.

But independent record label group Impala said its 2,500 members believed that regulators would 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 website of the EU executive.

Regulators said their probe would 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 songwriters.

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