Two U.S. Senators Say UMG-EMI Deal 'Presents Significant Competition Issues'

Issues On Both Sides Of The Atlantic

UNIVERSAL MUSIC GROUP's proposed $1.9 billion takeover of EMI MUSIC, got some harsh words from leaders of a Senate committee, who sent a letter FRIDAY (8/4) to the FEDERAL TRADE COMMISSION, writing that the deal "presents significant competition issues," and asking the agency to examine it closely.

"We believe this proposed acquisition presents significant competition issues that merit careful F.T.C. review to ensure that the transaction is not likely to cause substantial harm to competition in the affected markets," the letter signed by WISCONSIN Senator HERB KOHL and UTAH Senator MIKE LEE. Democrat KOHL is the chairman of the Judiciary subcommittee on antitrust issues, and Republican MIKE LEE is the subcommittee’s ranking minority member.

"In the course of this review, we also urge the commission to be mindful of the changes in the music industry in the last decade, particularly the shift to online distribution as the preferred way consumers purchase music," the senators added.

THE NEW YORK TIMES reports, "The letter reviews many of the major concerns raised by critics of the deal, like the possibility that it would give an expanded UNIVERSAL an unfair advantage in negotiating deals with digital services and in dealing with retailers of CDs, which still represent a majority, albeit a shrinking one, of the industry’s sales."

UNIVERSAL responded in a statement, writing "We appreciate the points raised in the joint letter from Chairman KOHL and Ranking Member LEE, as well as the committee's recognition of the historic changes in the music industry over the past decade. Since this deal was announced, we have worked closely with the FEDERAL TRADE COMMISSION to address many of these issues, and will continue to do so. Our investment in EMI will create more opportunities for new and established artists, expand music output and support new digital services. We remain confident of earning regulatory approval."

The deal also continues to be scrutinized in EUROPE, where MARKETWATCH.COM reports "anti-trust regulators are asking music industry rivals whether VIVENDI SA's UNIVERSAL MUSIC GROUP is proposing to sell off enough of its U.S. business."

The EU commission has extended its deadline for a decision on the merger to SEPTEMBER 27th.

A representative for the commission noted that it was normal procedure to send out questionnaires of this nature. "It's quite standard and is used to assess the impact of a merger," commission spokesman RYAN HEATH told DOW JONES NEWSWIRES.

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