EU Court Stops BMG-Sony Music Merger

A union between the two might stifle competition in the industry, says the court, overturning the Commission's approval

EU's second highest court has overturned a European Commission approval for a 2004 merger of Sony and Bertelsmann's music divisions named Sony BMG Music Entertainment – the world's second biggest music company.

The Luxembourg-based European Court of First Instance on Thursday (13 July) backed a challenge by a group of independent music companies saying that the commission's analysis of the merger was wrong.

The group argued Brussels had failed to prove that there was no danger that a merged Sony BMG would not be in a position to stifle competition in the music industry.

The court ruling forces the commission to re-examine the Sony BMG merger, casting doubt over Brussels' skills to put complex mergers to a thorough and fair examination.

"We think the work of the commission is absolutely terrible and it reflects in the original decision itself. There was no real analysis, and there was a contradiction between information and conclusions," said Isabelle Wekstein, an attorney for the Impala group representing the independent music companies.

"I think that the court understood perfectly that the commission did not do its job," she told the International Herald Tribune.

The decision was the first in which a European Commission decision to clear a deal has been overturned.

"This is uncharted territory," Ian Forrester, a Brussels-based antitrust attorney at White & Case law firm, told the Los Angeles Times.

The immediate reaction from the Sony and Bertelsmann music companies was that the "judgment does not affect the validity of the Sony BMG joint venture," and added in their joint statement that "we are studying the judgment carefully."

Japanese Sony Corporation and German Bertelsmann AG must now resubmit their applications for antitrust clearance - based on current market conditions - within seven days, EU antitrust spokesman Jonathan Todd told the AP news agency.

"We may very well re-approve the Sony BMG merger," commission spokesman Jonathan Todd said. "But it's also possible that we'll reach different conclusion. We have more data about the merger now."

Once the companies have re-applied, the European Commission will have five months to consider the matter again.