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Brussels, 20 July 2004

Commission decides not to oppose recorded music JV between Sony and Bertelsmann

The European Commission has granted regulatory approval to the creation of Sony BMG, a joint venture combining the recorded music businesses of Sony and Bertelsmann after concluding that it did not have sufficiently strong evidence to oppose the deal. The Commission will keep a close watch on the music sector as it becomes even more concentrated and would very carefully scrutinise any further major concentration in the industry.

On 9 January 2004, the Commission received a notification whereby Sony Corporation and Bertelsmann AG (BMG) would merge their recorded music businesses into a 50/50 joint venture named Sony BMG. The transaction comprises the companies’ activities regarding the discovery and development of artists and the recording and marketing of their music. It does not include their activities in music publishing or the manufacturing and physical distribution of records.

The Commission has assessed the merger very carefully as it reduces the number of so-called music majors from five to four without, however, giving Sony BMG the number one spot in Europe which continues to he held by Universal. Therefore, the Commission sought to establish whether the deal could create or strengthen a collectively-held dominant position between Sony BMG, Universal, EMI and Warner Music, the other two main players in the music industry.

The Commission particularly focussed its attention on the markets for recorded music. An analysis of a large amount of price data and third-party submissions in the recorded music markets of the different European Economic Area[1] countries indicated a relatively close price parallelism for CDs released by the five majors in some countries as well as certain features that could facilitate tacit collusion. On balance, however, the Commission had to conclude, taking into account a deficit in the transparency of the market, that the evidence found was not sufficient to demonstrate in a successful way that coordinated pricing behaviour existed in the past and that a reduction from five to four major recording companies would not yet create a collectively held dominant position in the national markets for recorded music in the future.

The Commission also examined the merger’s impact in the emerging market for online music licences as well as online music distribution, but concluded to the absence of serious competition problems. The same goes for the examination of the vertical relationships between Sony BMG’s recorded music and Bertelsmann’s downstream TV and radio activities in Germany, France, Belgium, Luxembourg and the Netherlands.

The Commission and the Federal Trade Commission of the United States co-operated closely in their review of the case.

Bertelsmann Music Group is a subsidiary of Bertelsmann AG, a German-based international media company whose activities also include television and radio production and broadcasting as well as book and magazine publishing. BMG’s music labels include Arista, Jive, Zomba and RCA.

Sony Corp of America belongs to the Japanese Sony group whose activities include consumer electronics and the entertainment industry besides the music recording and publishing business. In recorded music it acts through Sony Music Entertainment which owns the Columbia, Epic and Sony Classical, among other labels.

[1] European Union plus Norway, Iceland and Liechtenstein

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