Musical differences

The decision by the European court to annul the Sony-BMG tie up is a slap in the face for the European Commission which has struggled to get it right on music.

Brussels' clearance of the merger of Sony and BMG's music businesses two years ago came as a surprise after antitrust officials had expressed reservations about its effect on competition. After all, the EU had blocked a similar combination of EMI and Warner Music four years earlier. It seems that in July 2004, Sony and BMG managed to explain away any deterrent effect their merger would have on competition in the recorded music industry. The tie-up left 80% of the recorded music business in the hands of four companies - Sony-BMG, Vivendi, EMI and Warner Music.

When Brussels prepared its arguments against the EMI-Warner Music tie up in 2000, it suggested that a reduction in the number of companies operating in the business from five to four would lead to collective dominance of the market by a handful of operators. This would restrict competition and make it much harder for independent rivals to gain a foothold. Many in the industry could not understand what had happened in the intervening four years to convince the Commission that this would not happen when Sony and Bertelsmann put their music arms together. It could be that the EU's antitrust officials had suffered a series of blows and legal challenges to some of their competition theories and they were feeling less robust.