Sony-BMG Says EU Court Got It Wrong

Sony-BMG will have to wait until at least December 13 to see if there’s any legal support for its claim that the European Court of First Instance made key errors when blocking the European Commission’s initial decision to allow the two companies to merge.

That’s the earliest that the advocate general is expected to deliver a non-binding opinion on the appeal.

In almost nine out of 10 cases the judges sitting at the European Court of Justice, Europe’s highest court, follows the advocate general’s advice – but it usually takes several months before that decision is made.

By that time P. Nikiforos Diamandouros, the EU ombudsman, will be well into his investigation as to whether the European Commission was guilty of maladministration when it again allowed the merger on the second occasion it was put in front of it.

IMPALA, the organisation that represents about 3,500 independent music companies, successfully protested the EC’s decision to pass the merger without remedies the first time (in 2004) and prompted the ombudsman to look at the situation when it did it again in the summer.

Although there seems little legal point in the Japanese electronic giant and the German publishing house challenging the European Court of First Instance (CFI) for nullifying the first decision when the Commission has stuck to its guns and allowed it a second time, establishing that the first judgment should have been allowed may well strengthen their claim for damages.

Sony-BMG says the CFI made mistakes when assessing price transparency and claims the merged music giant would not create a dominant market position.

Its long-running antitrust battle to vindicate the merger is now set to run through complicated and exhaustive legal arguments regarding the way the EC collected its evidence and the way it was viewed by the CFI.

In the appeal hearing that ended November 9, Sony-BMG told 12 judges sitting in session that the CFI was wrong to use a "statement of objections" – a formal antitrust charge sheet – sent by the European Commission to the parties, as a benchmark in its assessment of the merger.

They’re said to be claiming the CFI "misunderstood the role and legal nature" of the statement of objections and should not have treated it as "findings of facts," according to Thomson Financial News.

The upshot of this legal wrangling is likely to hinge on whether the CFI is shown to have put too much pressure on the EC to raise the bar when examining whether merging companies will create a dominant market force.

Whatever the outcome, Sony-BMG is also likely to have problems with the ever-growing number of Euro MPs concerned that the EC ruling hasn’t taken sufficient account of Article 151 (4) of the EC Treaty, which obliges it to take cultural diversity into account in all decisions.