As predicted, Universal Music Group has been given the go-ahead on both sides of the Atlantic to complete its acquisition of EMI’s recorded music division. But in Europe, that will require selling “significant” assets.
The European Commission was first to approve the deal, subject to several conditions – the key one being the divestment of EMI’s Parlophone label. Also on the block are EMI France, EMI’s classical labels, Mute, Chrysalis, licensing business Coop and other local EMI arms. Universal will also sell EMI’s 50% stake in the Now! compilations.
Digital was at the heart of the EC’s concerns over the deal, as VP Joaquin Almunia made clear. “In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music,” he said in a statement.
“The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits.”
As far as the EC is concerned, the merger in its original form would have given Universal too much clout in negotiations with digital services – iTunes and Spotify are singled out in its announcement.
The US Federal Trade Commission (FTC) followed with its own approval of the deal, but without conditions.
“After a thorough investigation into the likely competitive effects of the merger, Commission staff did not find sufficient evidence that the acquisition would substantially lessen competition in the market for the commercial distribution of recorded music,” said Bureau of Competition director Richard A. Feinstein in a statement.
He went on to outline the FTC’s thinking on digital services specifically:
“Staff focused on whether Universal would have enhanced bargaining leverage after the acquisition, allowing it to extract from streaming services superior financial terms, or advantaged positioning for its content. Commission staff sought to determine whether the transaction would lead to higher costs to interactive streaming consumers or a more-2-limited selection of recorded music. Commission staff found considerable evidence that each leading interactive streaming service must carry the music of each Major to be competitive. Because each Major currently controls recorded music necessary for these streaming services, the music is more complementary than substitutable in this context, leading to limited direct competition between Universal and EMI. In the end, insufficient evidence existed showing that Universal and EMI offer products that could be viewed by streaming services as direct substitutes.”
The FTC and EC worked together during their investigations, but the FTC makes it clear that it feels differing market conditions in the US and Europe are a fair explanation of its decision not to require divestments, unlike the EC.