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Sony-BMG Merger Under Fire
01/31/2004 7:53 AM, Reuters
Opposition to the proposed
merger of Sony Music and BMG is mounting in Europe.
Several organizations and individuals are expected to
object to the merger plan presented by Sony Corp (NYSE:SNE - news) . and BMG's
parent company, Bertelsmann.
These organizations had until Jan. 28 to file objections to
the European Commission 's competition division.
Members of the EC competition department's merger task
force were in Cannes at the MIDEM music trade show to meet with
industry executives.
The EC -- which recently issued to several labels,
retailers and publishers a detailed, 15-page questionnaire with
40 questions related to the merger -- is expected to issue its
preliminary ruling on the proposed Sony Music-BMG merger Feb.
12, according to EC sources.
This is standard procedure in the "phase one" stage of a
merger review. If substantial objections are raised by
different parties on antitrust issues, the EC can then opt for
an in-depth "phase two" review. That process could last a
minimum of four months.
"We are going to review the entries from competitors and
customers" of Sony Music and BMG, a source at the EC says.
An EC official confirms that the process will move into
phase two. The official says, "The commission has decided to
open an in-depth inquiry into the Sony-BMG merger. It will be
formally confirmed in a few days."
Independent labels are poised to raise substantial
reservations about the merger. Independent labels organization
Impala will present the EC objections revolving around such
issues as horizontal and vertical concentration.
At MIDEM, representatives from the Brussels-based Impala
expressed concern about industry consolidation. Michel Lambot,
PIAS group co-chairman and Impala president, said: "We're
protesting for citizenship reasons. Our opposition is a moral
one. It is not about Sony or BMG, indies vs. majors; it is
about cultural diversity."
Martin Mills, chairman of the U.K.'s Beggars Group, added,
"When you give power to have a monopolistic position, they will
use it."
Patrick Zelnik, Impala VP and president of French indie
Naive, raised concerns about vertical integration, noting that
Bertelsmann is Europe's leading media group, with 24 TV
channels and 27 radio stations. If the merger is allowed to go
through, the industry "will end up in a universe that will
clearly be dictated by market power," he warned.
Zelnik said he anticipates that EMI and Universal will join
the ranks of those objecting to the merger.
Retailers also are expected to raise the issue of diversity
and potential market dominance. Billboard has learned that
retail groups have been contacted by the EC and are poised to
voice substantial reservations on the merger.
"It is of concern to us if we move from five main suppliers
to four," one retailer told Billboard.
But not all indies think the merger is going to have a
negative impact. Michael Haentjes, chairman of German indie
group Edel, tells Billboard that he has received the EC
questionnaire and that he will not raise objections.
"I never thought that majors were preventing me from doing
what I wanted to do, and it is not because there will be four
instead of five that it will change," he says.
As far as vertical integration is concerned, Haentjes says
that so far he has not seen much of an effect. "In big
conglomerates like these you rarely see cooperation between
divisions, and here it is no different."
Reuters/Billboard
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