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Universal’s Bid for EMI Music Business Faces EU Complaint

June 08, 2012

Universal’s Bid for EMI Music Business Faces EU Complaint

Citigroup Inc. agreed in November to sell EMI Group’s recorded-music and publishing businesses in separate transactions for a combined $4.1 billion. Photographer: Chris Ratcliffe/Bloomberg

Universal Music Group’s bid for EMI Group’s recorded-music business faces a formal antitrust complaint from European Union regulators amid concerns the deal could harm competition in the digital music industry.

The European Commission will send a so-called statement of objections listing possible problems with the deal, an EU official said today, speaking on condition of anonymity because the process isn’t public.

Regulators have a Sept. 6 deadline to rule on the bid by Vivendi SA (VIV)’s Universal, which they have said would create a company “almost twice the size of the next largest player” in Europe. Universal may not be sufficiently constrained by smaller rivals, customers’ buying power or illegal music downloads, the EU said when it opened an in-depth probe in March.

EU Competition Commissioner Joaquin Almunia is preparing to take his review of the Universal bid to the next stage, he said today in a speech in St. Gallen, Switzerland. The antitrust agency must ensure the combined company “would not be in a position to shape the future landscape in the digital music market to the detriment of users and artists,” he said.

Citigroup Inc. (C:US) agreed in November to sell EMI Group’s recorded-music and publishing businesses in separate transactions for a combined $4.1 billion. Universal will buy EMI’s record labels, home to Katy Perry and Coldplay, for 1.2 billion pounds ($1.85 billion). A Sony Corp.-led group that includes billionaire David Geffen will pay $2.2 billion for the publishing unit, according to statements in November.

Detailed Response

Universal will prepare a detailed response to address the commission’s concerns once it receives the EU’s complaint, the company said in an e-mailed statement.

“We will continue to work closely with the commission and look forward to securing regulatory clearance,” Universal said. “A statement of objections is part of the European Commission’s due process when considering mergers and is expected.”

Dylan Jones, a spokesman for EMI, declined to comment.

A statement of objections sets out regulators’ case for blocking a deal. Companies may seek an oral hearing to argue in favor of the deal and can offer to sell units or assets to resolve concerns. The EU blocked two deals in the last two years, including Deutsche Boerse AG’s bid for NYSE Euronext.

Digital Market Power

“A company with a large and popular catalog can have significant market power over digital platforms, which would have a keen interest to strike a deal with it,” Almunia said.

Impala, a group representing independent record labels that opposes the Universal bid, expects a “strong statement of objections” finding the combined company “is a danger in the physical as well as the digital market because it cannot be adequately constrained by competitors, customers or piracy,” said Helen Smith, Impala’s executive chairwoman, in an e-mail.

Impala challenged the EU’s 2004 approval for Sony and Bertelsmann AG to create the Sony BMG record label at the EU courts, forcing a re-examination by regulators. The deal was eventually approved in 2007.

Sony won EU approval to buy EMI’s publishing unit in April after it agreed to sell right to hit songs.

To contact the reporter on this story:

Aoife White in St. Gallen via awhite62@bloomberg.net.

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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