2006 dispute of Sony-BMG merger still unresolved in EU

By Tim Conneally | Published June 18, 2008, 12:27 PM

2008 has begun to look a lot like 2006 for Sony BMG in Europe. Publishing association Impala asked courts to overturn the EC's merger approval a second time, and joint venture partner Bertelsmann AG again expressed its desire to back away.

Independent music industry representative Impala has built a platform of opposition to major label mergers, and in its "mission statement" makes this assertion: "Independent music companies are often micro companies and SME's [small and medium enterprises], they're are at a disadvantage with regard to the majors; they do not have access to the same developed communication networks, financing, means to run marketing campaigns, the distribution networks. Some acquisitions and mergers squeeze SMEs out of the market, leading to a lack of diversity for consumers. "

This position has led the group to fight the merger of major music providers such as Sony BMG, and EMI with Warner. Several years ago, the group challenged the 2004 decision by EU antitrust regulators to approve the Sony BMG merger, saying that false assumptions were made about the monopolistic status of the joint venture.

In Summer 2006, "the little guy" Impala won its court case in the EU's Court of First Instance (CFI), which resulted in an overturning of the European Commission's approval of Sony's and Bertelsmann's merger. The EC appealed the CFI's ruling in the highest EU court, the European Court of Justice; but the high court only agreed with the CFI's decision and annulled the clearance given to the merger.

After a period of re-evaluation, the EC has again unconditionally signed off on the merger, effectively starting the whole process over. Competition Commissioner Neelie Kroes said, "This has been a long and very thorough investigation. I am confident in the conclusion reached. This merger poses no competition problems."

So the intrepid Impala has again appealed the EC's decision, back in the Court of First Instance. The group challenges the approval on the grounds that market access and recovery were not properly taken into consideration. The group believes the EC has repeated many of the same mistakes that it made before, despite the court's judgment in 2006.

Executive Chair of Impala Helen Smith stated: "There is a huge contradiction here. Politically the EC is light years ahead of where it was when it first authorized the Sony BMG merger. But we still seem to be some way off relying on the regulators to guarantee an open and competitive market, so we had no choice but to appeal."

Meanwhile, as a Financial Times rumored in 2006, Deutsche Welle last week also said Germany's Bertelsmann is again looking to exit the joint venture with Sony.