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Citigroup EMI Asset Sale Merits FTC Scrutiny, Group Says

The U.S. Federal Trade Commission should scrutinize carefully whether Citigroup Inc. (C)’s proposed sale of EMI Group (EMIS)’s music and publishing assets would hurt competition in the music industry, an advocacy group said.

The sale of EMI assets would reduce the number of major record labels from four to three, Washington-based Public Knowledge said today in an e-mailed statement. Sony Corp. (6758) and Universal Music Group “would control the emergence of new distribution options for the entire industry,” the group said in a letter to the FTC’s Bureau of Competition, which is reviewing the deal under antitrust laws.

Citigroup agreed in November to sell EMI’s publishing unit to Sony and its recorded music business to Vivendi SA (VIV)’s Universal Music Group for a total of $4.1 billion. The proposed breakup of London-based EMI, the 114-year-old music company that owns Abbey Road Studios, sells Beatles albums and publishes songs by the late Amy Winehouse, ended a nine-month bidding war.

Citigroup, the New York-based lender, seized EMI in February of last year after investor Guy Hands, founder of U.K. private equity firm Terra Ferma Capital Partners, fell out of compliance with loan covenants.

Citigroup spokeswoman Danielle Romero-Apsilos declined to comment on the Public Knowledge letter.

Control of Music

The combination of Universal with EMI’s recorded music unit would create a company that controls about 40 percent of music sales, according to Public Knowledge, a non-profit group that advocates for digital rights. The sale of the music publishing business to Sony would allow it to control 32 percent of publishing revenues worldwide and give the combined company publishing rights to 64 of the Billboard Hot 100 titles from 2011, the group said.

“This sort of control would put Universal in a position to ‘make or break’ any new service all by itself, allowing it to hamper innovation and/or demand exorbitant terms and conditions,” Public Knowledge said in the letter, which was also signed by the Media Access Project, a Washington-based public-interest group that advocates diverse ownership of media outlets.

Mitch Katz, a spokesman for the FTC, declined to comment on the letter.

‘Expand the Output’

Peter Lofrumento, a spokesman for Universal Music Group said by e-mail that the company’s “reinvestment in EMI will expand the output of new music and create more opportunities for artists, while supporting digital innovation and consumers’ access to music.”

“We have every business reason to continue licensing our music to as many digital platforms as possible,” he said.

Four record labels control 90 percent of recorded music sales in the U.S., led by Universal with a 31 percent share, according to statistics cited by Public Knowledge in the letter. Sony is the second largest with 28 percent, while Warner Music Group is in third place with 20 percent and EMI is in fourth with 10 percent, Public Knowledge said citing 2010 figures.

The transactions are also being scrutinized by European authorities.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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