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Groups Say Universal-EMI Deal Could Stifle New Digital Music Services Groups Say Universal-EMI Deal Could Stifle New Digital Music Services

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Congress

Groups Say Universal-EMI Deal Could Stifle New Digital Music Services

June 14, 2012

Two public interest groups on Thursday called on the Federal Trade Commission to closely examine Universal Music's bid to buy part of EMI, saying the transaction will increase concentration in the music industry and could stifle the development of new online digital music platforms .

One week before a Senate Judiciary Antitrust Subcommittee hearing on the Universal-EMI deal, the Consumer Federation of America and Public Knowledge urged greater scrutiny of the transaction in a report filed with the FTC. The commission is examining Universal's bid to buy EMI's record label and the proposed purchase of EMI's music publishing business by an investment group led by Sony Music.

While Sony will gain control of more than a million compositions in EMI's catalog under its deal, the Universal-EMI transaction has sparked greater concern among critics, which include rival Warner Music. If the Universal deal is approved by federal regulators, the number of major U.S. music labels would drop from four to three.

It also would give Universal a more than 40 percent market share, which far exceeds the level of concentration that prompts concern under current FTC and Justice Department merger guidelines, according to the CFA and Public Knowledge .

The groups also argue that if Universal is allowed to swallow EMI's music label, it will be in a strong position to dictate which digital music services succeed.

"In simple terms the post-merger firm would have a strong incentive and increased ability to exercise market power to undermine, delay, and distort new digital distribution business models, in a market that has been a tight oligopoly for over a decade," CFA Research Director Mark Cooper said in a statement. "The FTC must take steps to prevent this severe harm to competition and consumers."

The deal also is being examined by the European Commission. In April, the commission cleared Sony's bid to buy EMI's music publishing business but is weighing whether to raise formal objections to Universal's bid for EMI's record label, home to top acts such as Katy Perry and Coldplay.

"We opened our in-depth investigation last March and we are getting ready to move to the next stage in our proceedings," European Commission antitrust regulator JoaquĆ­n Almunia said in a speech last week. "Ultimately, we will need to make sure that, in this already concentrated market, the company that would emerge from the deal would not be in a position to shape the future landscape in the digital music market to the detriment of users and artists."

Universal and some music industry analysts maintain that given the changes in the music industry, record labels do not have the influence they once had and in fact are now much more dependent on digital distributors like Apple's iTunes store than they were in the past.

"There's little new here as CFA's analysis continues to vastly overstate market concentration" Universal Music Group spokesman Peter Lofrumento said in a statement. "The music industry is intensely competitive and barriers to entry have evaporated in today's digital environment. Labels cannot dictate the price in a marketplace where a handful of major retailers account for the majority of music sales. We welcome the opportunity to address the facts and do away with any myths."

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