European Court Annuls SONY/BMG Merger
In a landmark ruling which will set important legal and political precedents, the European Union's Court of First Instance has overturned the European Commission's 2004 authorisation of the Sony/BMG music merger.
The Luxembourg Court pointed out that the Commission's analysis of the Sony BMG case was left wanting in various fundamental respects. It contained a series of legal and economic errors which renders the decision null and void.
The Commission waved the merger through unconditionally in 2004, creating the world's second largest music company and putting 80% of the worldwide music market into the hands of four media conglomerates. This was despite widespread industry objection and previous market assessments that further concentration could not be tolerated. The independents highlighted a catalogue of fundamental mistakes which left the Court in no doubt that it had to overturn the Commission's approval. The Court also ordered the Commission to pay three quarters of IMPALA's costs.
This is a victory for music and cultural diversity. It is the start of market recovery. The independents take the view that the judgement underlines the need for any assessment of mergers in creative sectors to take into account the economic, social and cultural specificities of markets. IMPALA also emphasises that a review of the merger process in terms of the rights of third party market operators is required. IMPALA had made the case to the Court that the merger clearance process is biased towards large corporations and lacks transparency. Third parties who oppose a merger have few rights compared to the notifying parties. They also have extremely limited access to the Commission's file. This makes proper decision making is very difficult.
The parties will now have to consider their options. An appeal to the EU's highest court, also in Luxembourg, would be difficult as it can only be made on grounds of law. The merger will go back to the Commission but the independents believe that the problems highlighted by the Court right across the music market are too fundamental to be repaired. Without competition clearance Sony/BMG would have to dismantle.
The Court's ruling will also thwart any other attempts to merge such as between EMI and Warner. It now looks extremely unlikely that they would obtain the competition clearances necessary. IMPALA will continue to oppose any further concentration.
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