A blow, really?

The European Commission has decided to open a phase II investigation into the merger between Sony and BMG. Recall that the earlier decision approving the merger in July 2004 was annulled by the CFI last summer. The CFI went quite far in that case, allowing the Commission to indirectly prove the existence (prior to a merger) of collective dominance in a given industry. A few months ago, I questioned whether the annulment was really a blow for the Commission, as was argued by certain observers. In fact, today's decision may confirm my early analysis :). The CFI's ruling relaxes the constraints which in the past prevented the Commission from threatening the music majors' oligopoly (sthing which the Commission had unsuccesfully tried to do in previous merger decisions). Today's decision raises further the risk that the Sony/BMG merger be jeopardized long after its implementation, paving the way to heavy ex post deconcentration measures (which would either come from a prohibition decision or from modifications submitted by the parties during the procedure).

Comments

[KNeefs]

Related to this, I would like to know why all of the sudden Impala has no objections to a merger of Warner Music and EMI in the US. (see The Economist, Feb 24th 2007, p.9). Only last year, Impala complained to the EU that competition would be harmed by consolidation amongst big music companies.

This makes me question the integrity of Impala, unless Warner and EMI have made commitments towards the independent music labels.

[Nico]

Kristoff,

fair point indeed. Here's in substance what explains Impala's surprising stance to consolidation in the music industry:

"Warner has already approached Impala and signed a deal designed to ensure that Impala would support any Warner/EMI merger. Impala, which is thrilled by the deal, says that Warner has agreed to three general principles in the event of any merger: 1) "behavioral undertakings" that would boost competition in the market, 2) divesting itself of some acts, and 3) supplying financial assistance to the independent music labels, especially the new Merlin initiative that will make the indies into a "virtual" fifth major label.

Impala has announced that they will continue to oppose the Sony/BMG deal, though, unless the companies do a deal like Warner's. The independent labels want to ensure that they have access to the market, and they worry about getting squeezed out by the big players".

So basically, Impala's getting a say into what remedies the merger parties will submit to the competition agencies...

See here: http://arstechnica.com/news.ars/post/20070220-8888.html

[KNeefs]

I've just read the statement on the Impala website:

http://www.impalasite.org/docum/04-press/press_200207.htm

To be honest, I am not very convinced by their arguments. As you indicated, they are basically claiming their input in the to-be-proposed remedies of the merger parties and threatening other companies to blatantly oppose any consolidation move without prior commitments to them.

Since when has Impala become a competition authority of it's own? Imagine national consumer organisations issueing out warnings to companies they should first negotiate their merger decisions with them "or else". If Impala has rightious arguments against a merger they should utter them on the right platform, not in some conference room in Warner's offices.

regards,

Kristof (one f ;) )

[Chris]

Hello -

IMPALA aren't a regulatory body, but they do have a contract with the Commission to be one of their official sources of information for researching into the impacts of possible mergers.
Also, the Sony/BMG merger was overturned by the CFI after the case was brought by IMPALA.

So they do have quite a lot of influence over this, both officially through their role as consultants to the Commission, and also by threatening to take action through the courts, as they have done in the past.

I wrote a couple of articles on this (www.agenceurope.com) if you're interested...

Chris

[Chris]

Hello -

IMPALA aren't a regulatory body, but they do have a contract with the Commission to be one of their official sources of information for researching into the impacts of possible mergers.
Also, the Sony/BMG merger was overturned by the CFI after the case was brought by IMPALA.

So they do have quite a lot of influence over this, both officially through their role as consultants to the Commission, and also by threatening to take action through the courts, as they have done in the past.

I wrote a couple of articles on this (www.agenceurope.com) if you're interested...

Chris