The European Commission’s investigation into the prospective merger between Universal Music Group and EMI Music has reached its second phase, according to reports out of Europe. This next phase in Universal Music Group and EMI Music’s drive to get their merger approved will tackle the anti-competition concerns that have plagued the proposed merger since its announcement in November 2011.
EMI Music, which was founded in 1931, is based out of London, where it houses several of the world’s most recognizable record labels, including Capitol Records and Virgin Records. Artists that have recorded under the umbrella of EMI include The Beach Boys, The Beatles, Lady Antebellum, Coldplay, Radiohead, and Snoop Dogg.
EMI was purchased by Citigroup in February 2011 due to EMI’s extensive debts. In November 2011, Citigroup announced plans to sell off elements of EMI. The company’s music publishing section was sold to Sony/ATV for an estimated $2.2 billion. EMI Music was sold to Vivendi’s Universal Music Group for an estimated $1.9 billion.
Universal Music Group has been in operation since 1934, when it was known as Decca Records. Since then, it has grown to become the largest music company in the world. In February 2004, Universal Music Group was purchased by Vivendi SA.
Universal Music Group’s winning bid for EMI Music beat out several other bids, most notably a bid from Len Blavatnik, the owner of the Warner Music Group. Warner Music’s former chairman, Edgar Bronfman, Jr., has expressed outrage at the proposed deal, which would see Universal Music Group take over an estimated 40 percent of the music market.
“It’s dangerous, problematic and has to be stopped,” Bronfman told All Things Digital, “Warner will fight it tooth and nail.”
IMPALA, the Independent Music Companies Association, has also expressed displeasure with the proposed merger. IMPALA Executive Chairman Helen Smith told The Financial Times in November that any such merger between EMI and Universal Music would be to the detriment of the music industry.
It is the worries of both IMPALA and Warner Music Group, as well as others in the music and entertainment industry, which the European Commission will tackle head on in their second phase of investigation.
The European Commission made a strong public statement on March 23, 2012, announcing that the investigation into the EMI/Universal Music merger had moved into phase two, but that this phase would look deeply into how this merger would impact the rest of the music industry in Europe.
“The proposed acquisition could reduce competition in the recorded music market to the detriment of European consumers. The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions,” Commission VP in charge of competition policy Joaquin Almunia told the press.
While both EMI and Universal Music are well aware of the concerns that will be discussed by the European Commission, both companies remain, at least outwardly, confident that the merger will be approved within the year.
“Phase II was always expected,” Universal Music said in a statement. “We will continue to co-operate fully with them and look forward to a successful resolution of the process.”
The European Commission will now have 90 working days to look through the proposed deal and investigate any concerns the grouop may still have with various aspects of the merger. August 8, 2012 has been designated as the deadline to making a final decision on whether or not to approve the merger. The Federal Trade Commission in the United States is also investigating the merger, but has not made any definitive statements regarding whether or not it will approve.