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EU court adviser recommends rejecting Sony BMG appeal to blocked merger PDF Print E-mail
Friday, 14 December 2007

BRUSSELS, Belgium (AP) -- The EU's top court should back a ruling that overturned regulatory approval for Sony Corp. and Bertelsmann AG's 2004 deal to combine their music units and form the world's second-largest record label, a legal adviser to the EU's highest court said Thursday.

In a legal opinion that is not binding on the European Court of Justice but is followed in most cases, Advocate General Juliane Kolkott said the court should uphold a decision made last year by the Court of First Instance that stripped away EU clearance to a business that was already up and running.

She said the CFI ruling had not laid down an excessively high standard for clearing the deal and the court had "rightly held" that regulators had not done enough to show that record prices could not be coordinated.

Kolkott did say the court was wrong to tell the EU's executive arm to look at the market again -- but this was not enough to throw out the entire judgment.

The deal between Sony Corp. and Bertelsmann Music Group brought artists like Shakira, George Michael, Avril Lavigne and Elvis Presley under one roof and joined up labels such as Arista, Jive, Epic and Columbia.

Independent record labels took their legal challenge to the EU appeals court, the Court of First Instance, which agreed with them by criticizing regulators, saying they had not done enough to prove the combination would not lead to a joint monopoly in the record industry and players would not coordinate prices.

The EU's executive arm was forced to examine the deal a second time, using more recent information on the sector and clearing it in October, claiming mountains of new evidence to prove that the two companies would not damage the music scene by combining and shrinking the number of major music companies from five to four.

It said it failed to find any evidence of collusion to back up complaints that record labels coordinated their budgets, prices for chart albums and others, overall pricing policies, release dates, access to retailers and airplay as well as how they calculated how well an album charted.

It had looked at how that affected retail, discount and wholesale prices for all CD chart albums sold by Sony BMG and rivals Vivendi SA's Universal Music Group, EMI Group PLC and Warner Music Group PLC in Europe between 2002 and 2006 -- and examined licensing for Internet downloads of albums since 2004.

BMG was a branch of Germany's Bertelsmann AG, an international media group with interests in broadcasting, book and magazine publishing. It joined with the Japanese electronics and entertainment giant Sony in 2004, saying they needed to combine forces to deal with declining CD sales and the threat of declining record sales as illegal Internet downloads surged.

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