The "mega-merger" between Ticketmaster Entertainment (TKTM) and Live Nation (LYV) was thrown into doubt yesterday when UK regulators blocked the deal on anti-competitive grounds.
The Competition Commission provisionally ruled against the proposed $2.5bn (£1.5bn) deal, saying it would "limit the development of competition in the market for live music ticket retailing". It fears that the creation of such a dominant player would block competition in the market and drive up the price of concert tickets. To get the go-ahead one of the companies may have to offload its UK business.
However, the companies are working on remedies that they hope will convince the watchdog to change its mind. They will consult for the next two weeks over a range of options that company insiders admit could involve selling one of the UK businesses only "if the worst came to the worst".
The regulator said it was unlikely to prohibit the merger in its entirety, but added that another possible remedy was for the merged company to guarantee that a proportion of its UK tickets would be sold through a rival.
The regulator plans to consult with the Department of Justice in the US, which is also scrutinising the merger, and will make a final ruling before 24 November.
The deal has caused controversy in the US, with Bruce Springsteen one of its most vocal opponents.
The companies responded in a joint statement, which said they were "committed to this merger and look forward to addressing any and all issues that the Commission deems necessary".
The Office of Fair Trading referred the deal to the Commission in June.
The Commission's concerns centre on whether CTS Eventim (EVDG.DE), a German company, can create a viable alternative to the merged group. CTS recently signed a deal with Live Nation to provide ticketing for concerts and venues in Britain. The Commission fears that the move will be scuppered after Live Nation merges with a rival to CTS.
Christopher Clarke, deputy chairman of the Commission, who led the inquiry, said that the merged group would have every incentive to prevent a rival entering the UK market, adding: "We believe that, if the merger proceeds, Live Nation will seek to limit its relationship with CTS, with the effect of putting CTS's future prospects in the UK in considerable doubt."
Mr Clarke said the regulator fears higher ticket prices brought on by lower rebates to promoters and venues, as well as a lower quality of service and less innovation in the market. The Commission found no other adverse effects on competition.
While both companies are based in the US, Ticketmaster is the largest ticketing agent in the UK, with a market share at about 50 per cent in 2008. Live Nation is the world's largest concert promoter, operating venues for live music and theatrical events as well as contracting global stars including Madonna and Jay-Z.
The two companies said the proposed merger was crucial to help save a music industry on its knees.
"We must be clear about the challenges of the music industry, which is at a decisive crossroads. The recording industry is a shell of its former self. Where the recording industry was once the economic engine for the music business, it is live entertainment that is now the future," they said.
The companies said the merger will bring more efficiency and will "help achieve needed change that will strengthen a flagging music industry.
"We firmly believe that our merger achieves an important and much-needed public interest, and remain optimistic that it will ultimately be approved," the statement concluded.
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