EU to OK Sony-Bertelsmann merger — sources

/ Source: The Associated Press

The European Union's antitrust chief decided Thursday to approve a merger between Sony Music and Bertelsmann AG's BMG music business after he couldn't find enough evidence that the deal would harm consumers to block it, sources familiar with the case said.

The decision came after two days of closed-door hearings where the companies rebutted arguments supported by many small independent labels that the deal would lead to higher CD prices, less choice for music lovers and stifle the development of on-line music stores.

After reviewing the results, EU antitrust chief Mario Monti and his team decided Thursday they did not have "sufficient evidence" to oppose the merger, according to sources familiar with the case but speaking on condition of anonymity.

An official announcement was expected as early as Friday.

Spokesmen for Sony Music and Bertelsmann refused to comment.

The deal would leave four music industry "majors" controlling about 80 percent of the market. Sony-BMG and current No. 1, Vivendi Universal, would each have about a quarter. The others are EMI and Warner Music.

Sony artists include Aerosmith, George Michael and Barbra Streisand, while the BMG stable has Avril Lavigne and Elvis Presley.

In a sealed statement of objections sent last month, the European Commission expressed fears the deal could exacerbate "tacit collusion" in the industry, leading to higher CD prices and less choice for consumers in a market where there is already too little competition.

The EU, citing similar concerns, opposed a deal between music giants EMI Group PLC and Warner Music Group Inc. four years ago.

As in that case, small independents also opposed the Sony-BMG deal, arguing at news conference last week that the combination would further reduce their ability to get shelf space for their artists, hurting cultural diversity in Europe.

The commission also voiced concerns about the impact of the deal on the emerging market for online music and devices in Europe, according to those familiar with the case.

Sony operates a new music-downloading service called Sony Connect, and there are worries that it could hamper competing services by restricting access to its stable of talent.

Apple Computer Inc. executives, who launched their iTunes online music service in Europe this week, were among those testifying at the hearing on Tuesday.

Sony and BMG argued that market conditions had changed dramatically since the ill-fated EMI-Warner deal, and that the new alliance would help cut costs and ensure investment in new artists.

The deal still faces an antitrust review in the United States.