Login:
Password:
Lost Password?
Print this article  |  E-mail this article  |  Comment on this article

European Union Could Split Sony BMG

By Nate Mook, BetaNews

July 13, 2006, 1:45 PM

A day after announcing it was fining Microsoft 280.5 million euros for not complying with an antitrust ruling, the European Commission on Thursday said it planned to reevaluate the merger between Sony Music and BMG, and could end up splitting up the music company.

The decision surrounds a finding that the 2004 merger would not harm customers. Independent record label Impala filed a challenge stating European antitrust regulators made false assumptions that promotional discounts would inhibit the creation of a monopoly.

The European Court of First Instance agreed with Impala's assessment, saying, "The commission did not demonstrate to the requisite legal standard either the nonexistence of a collective dominant position before the concentration or the absence of a risk that such a position would be created as a result of the concentration."

As a result, Sony Music and BMG will have seven days to re-file documents to the EU Commission requesting permission to merge their music units once again. In the initial filings, the two companies said they needed to join to better fight declining CD sales due to illegal downloading from the Internet.

If the Commission does not approve the merger this time around, Sony BMG would be split apart. However, BMG said the EU's announcement would not have any impact on the joint venture. The company expects to discuss the matter with the European Commission within the next week.

The Commission could, however, fight the Court of First Instance ruling through an appeal. It has two months to make a decision on whether it will appeal or agree to reanalyze the merger.

Add a Comment (21 Comments)

BetaNews reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Foul language and personal attacks will not be tolerated.

Name (required):

E-mail (required):

Enter Your Comment:

By ds0934

posted Jul 18, 2006 - 11:39 AM

"...the two companies said they needed to join to better fight declining CD sales due to illegal downloading from the Internet."

No, sales are declining because the quality of artists is declining (or dying off). Ask yourself this basic question: How many CD's have you bought in the last year where even more than half the songs were strongly appealing?

Score: 0

By afinnie

posted Jul 13, 2006 - 11:46 PM

Boy I long for the days of old when Columbia and Epic and their associated labels were part of CBS Records and Sony's only involvement was in a joint company called CBS Sony that sold music only in Japan.

Score: 0

By fewt

posted Jul 13, 2006 - 7:23 PM

Not to change the subject or anything (heh), but to address those bi*ching err whining err I mean complaining about the EU and where Microsoft's money will go:

"Where does the money go?

The penalty payment is paid into the EU Budget. It does not increase the Budget, but reduces the contribution from Member States. The fines therefore reduce the overall tax burden on individuals."
- http://europa.eu/rapid/p...e=EN&guiLanguage=en

As for Sony, it looks like the court asked them to re-investigate, which resulted in this action by the COURT.

"The European Court of First Instance in Luxembourg said in a statement that the European Commission hadn't met the required legal standards and had only carried out ``an extremely cursory examination'' of the effects of the merger. The court ordered the regulator to review the transaction again."

"Impala said the commission ignored evidence that the combined company would be able to dominate the market. The judges agreed."

The EU didn't make this decision (addressing bourgeoisdude) the court did, as a result of the lawsuit initiated by Impala.

- http://www.bloomberg.com...rlRdCGMsIg&refer=uk

Score: 0

By PC_Tool

posted Jul 14, 2006 - 9:03 AM

Lower taxes through law suits?

Kewl. Why didn't the US think of that? I can see the campaign slogan now:

"Will sue any company it takes to keep taxes below 10% Gross wages!"

"The GOP. We Sue For YOU"

Yeah. That'd be sweet.

/sarcasm

Score: 0

By ds0934

posted Jul 18, 2006 - 11:37 AM

Not kewl. Based upon our habit of filing infinite appeals, that would mean your tax burden would quadruple every year.

Score: 0

By davewalden

posted Jul 13, 2006 - 5:47 PM

After thinking about this for a short while, I would really like to see the EU split up Sony into countless smaller companies that become so insignificant that they blow away in the wind along with all of Sony's crap.

One can dream....

Score: 0

By drumcat

posted Jul 13, 2006 - 3:32 PM

But illegal sharing is contained, right? (http://www.usatoday.com/...06-12-riaa_x.htm?csp=34)

Score: 0

By Banquo

edited Jul 13, 2006 - 3:12 PM

"In the initial filings, the two companies said they needed to join to better fight declining CD sales due to the prefabricated garbage they are trying to sell as music these days."

There, fixed that for them.

That, and the fact that the CD is becoming antiquated. Most people now have mp3 players or listen to music on their computers so it makes far more sense to buy music online. In addition they can buy only the songs they want instead of a CD with one or two good "radio songs" and the rest awful filler. Of course the whole concept of "record companies" is becoming just as archaic. With the internet artists no longer need to sell their souls to some corporation to sell their music (and by artists I don't mean those "bands" put together by the record companies and MTV to sell to the brainwashed masses).

Score: 0

By Friar Tuck

posted Jul 13, 2006 - 3:01 PM

"the two companies said they needed to join to better fight declining CD sales due to illegal downloading from the Internet"

What Sony and BMG fail to mention is that the RIAA own statistics show that this "so called illegal Downloading" has actually increased the sales of CD's.

Some people (not all), like myself, will download a few songs from a CD and if I like it, I go out and buy it. In addition, with all of the legal download sites available, people are just finding it easier to download the CD and then burn it to disc.

Plus, if you look at the cost of these "LEGAL DOWNLOADS", it is far less expensive then going out and buying the CD at a store. I personally like having the original art with the CD so I go out and buy it.

Score: 0

By davewalden

posted Jul 13, 2006 - 2:41 PM

I am like you... I stear clear of Sony like a plague.

When it comes to the EU & EC...
my suggestion is to stop trying to make sense of the senseless.

Score: 0

By bourgeoisdude

edited Jul 13, 2006 - 2:26 PM

OK. I'm not a Sony fan anymore--I was, but not anymore. Most of the BN regulars know this. I can't stand Sony BMG _OR_ Sony's electronics products.

Okay, having said that, the EU is clearly 100% without a doubt entirely wrong here--unless I am misinterpreting what I am being told. Now, the question is: Who in the world gives the EU the right to split companies in two after they already allowed it?

Sony, BMG, Microsoft, and all the other "monopolies" must have consequences for their actions, but the EU can say one thing and just change their mind?

This means that even if the EU had ruled MS did enough to be open, they could have just come back tomorrow--or in 4 years--and say "oops, we didn't see such-and-such, let's fine MS for that now." In the states they call that double jeopardy, but I suppose EU can defy their own rulings...that is anarchy to the extreme. EU can't go back on their previous findings, whether they screwed up or not. Once found not guilty/not liable, it should remain that way.

Perhaps I am missing something...? How is this in any way Democratic? If one group says all, does all, and makes all, it is still ONE group, making it anarchy, right? Heh, EU controls it all, so as the king of Europe, they must break up all of their--(ahem), I meant unfair--competition.

Score: 0

By kprovance

posted Jul 16, 2006 - 12:20 AM

I think the EU is a monopoly unto itself. It should be broken up.

Score: 0

By cornucopia

edited Jul 13, 2006 - 7:39 PM

Please correct me if I'm wrong but this is what I understand.

1. The original merger was approved by the European Union (which seems to also be called the European Commission)

2. The challenge to the EU's approval went to the European COURT - a different animal - whose role includes acting as a watchdog for decisions made by the EU

3. After a ridiculously lengthy court process the EC decided the approval given by the EU two years ago is VOID. The merger is no longer valid.

4. So now, Sony/BMG have two avenues.
(a) they lodge an appeal with the European Court against the Court's decision. The EU is not involved at this stage at all. If Sony/BMG win it's all over for the Indies and S/BMG continue on their merry way.

(b) If they lose the appeal they will then have to go back to the EU and do the approval application all over again. This time the EU will have to look at their arguments in TODAYS market (which won't be good for Sony/BMG) and will be forced to address the issues more completely. If they dont it could be voided again.

So its not the EU deciding to approve and then deciding not to. It's the European Court annulling the EU's slack decision. There were 2 different bodies involved.

So is the Sony/BMG merger currently invalid? How does that work? They are in a bit of a pickle LOL

Score: 0

By mdappe

edited Jul 14, 2006 - 6:01 PM

Not quite correct, cornucopia.

1) Merger was approved by the European Commission (which is - kind of - the "government" of the European Union) two years ago.

2) The merger approval was appealed by Impala, the independent labels' association a few months later.

3) The appropriate appeal's body, the Court of First Instance (The second highest court of the European Union), annulled the decision a few days ago. This does not mean that the merger is not allowed to take place, only that the decision of the European Commission was not well reasoned.

Next steps of action are:

1) SonyBMG will have to re-apply to the European Commission for merger clearance. (Many news sources cite that this has to be done within 7 days, but I believe this is impossible and extensions will be granted. Preparations for such a filing usually las several months at minimum.)

2) The Commission will then decide whether or not to approve the merger (should take about 5 months after new filing of the merger).

3) If it approves the merger, SonyBMG will continue. Impala could of course appeal the Commission's new clearance decision again.

4) If the Commission blocks the merger, SonyBMG can then sue the Commission for damages for integration cost etc. They can also appeal the decision before the Court of First Instance but would nevertheless be required to be split up.

Irrespective of all this, the Commission or SonyBMG could appeal this weeks judgment at the European Court of Justice, the highest court of the EU. This appeal would then run in parallel to the actions mentioned above and will take many years. I am not sure what would happen if the Commission now rejects the merger, forcing SonyBMG to split up and then the European Court of Justice annulling the judgment of the Court of First Instance...

Regarding the issues, the real problem of the Commission was that the few people dealing with the transaction were very narrow-minded in their investigation to get the deal blocked. However, in the last weeks of the investigation, people higher up in the Commission realised that their arguments were not all well-founded, and that they had ignored lots of evidence presented by Sony and BMG. So, they decided to clear the merger, but did not re-write reasons for its the decision from scratch. So they ended up with a reasoning hinting at potential competition problems, while at the end saying "therefore, we clear the merger". Of course, the Court picked up on this....

Marko

Score: 0

By ryusen

posted Jul 13, 2006 - 7:45 PM

I think what you are missing here is that these are different bodies. First the EC said the merger looked ok, only after a complaint by another company did the Court (different body) say they might have to look into this descision. The closest paraloel i can come up with in this coutnry would be the FTC approving something, then a private company sued and the courts said, no. This isn't like the same group of people reserving their descision.

Score: 0

By fewt

posted Jul 13, 2006 - 6:14 PM

Sony (like foosball) is da debbil.

I could care less either way if they split them or not.

Score: 0

By drumcat

posted Jul 13, 2006 - 3:36 PM

I say put all the people involved with the rootkit on one side... =)

I have no confidence in the EU's legal biz practices. I take it for face value; they are making this sort of corporation-bashing as a revenue source. The interesting thing is that people have always been willing to revolt. When will it be corp vs gov't?

Headline: CNN reporting Sony BMG hires Halliburton to conduct operations against EU facilities

Score: 0

By bourgeoisdude

posted Jul 13, 2006 - 5:41 PM

"I say put all the people involved with the rootkit on one side... =)"

Funny you say that--Sony IMO has been going downhill in quality and support since around the time Sony and BMG were beginning "talks". I should be happy with this decision based on that--this may be good for the market.

Again though, there are many more reasons not to force them to break up than there are reasons they should break up.

I just thought it was odd--I don't hate the result of this as far as sony and BMG are concerned, but heck, the EU is treading in dangerous territory.

Score: 0

By fewt

posted Jul 13, 2006 - 7:24 PM

This isn't an EU decision, it is a court decision based on a lawsuit by Impala. (see my comment above for more detail.)

Score: 0

By wincement

posted Jul 13, 2006 - 2:36 PM

Agreed.

P.S. You know you're going to be flamed to death for having a sensible opinion, right?

Score: 0

By ryusen

posted Jul 14, 2006 - 3:32 PM

Sensible, but erronious... and no flames so far.

Score: 0

Nov 21 - 6:51 PM ET Coalition urges better laws for e-mail and cell phone privacy

Nov 21 - 6:42 PM ET How is Internet advertising faring in this bad economy?

Nov 21 - 6:15 PM ET From out of the Amazon Cloud, an AWS winner emerges

Nov 21 - 5:20 PM ET Mufin music finder enters public beta, adds widgets

Nov 21 - 5:01 PM ET Google launches its SearchWiki semantics plug-in

Nov 21 - 4:57 PM ET Asus previews a slimmer, less costly Eee PC

Nov 21 - 4:32 PM ET New Adobe Media Player ushers in AIR 1.5

Nov 21 - 2:11 PM ET AT&T to add Pantech's low-cost C630 phone to 3G lineup

Nov 21 - 1:11 PM ET iPhone gets firmware 2.2 update

Nov 21 - 11:51 AM ET The Dell surprise: Higher earnings on lower revenue