Universal Weighs Up Opposition

Universal Music appears to be weighing up the opposition to its proposed purchase of EMI’s recorded music business before offering any concessions to Europe’s regulatory authorities.

“Universal hasn’t offered any concrete concessions,” a European Commission source told Reuters, while a spokesman from the Vivendi-owned entertainment giant later confirmed that the company wants to see the objections before making any response.

The statement of objections is part of the European Commission’s usual due process when looking at mergers, prompting the would-be purchaser to start the horse-trading that it hopes will enable it to get clearance.

The issue may hinge on the strength of the opposition to Universal taking over a major slice of EMI and the opponents’ ability to persuade the EC that allowing the deal would create a bully in the marketplace.

Helen Smith, the executive chair of IMPALA, the European independent music companies’ organisation, has been very vocal in her opposition to the deal.

As early as November, before Universal had won the bidding war for EMI’s records business, she told Financial Times she “doesn’t believe any remedies would suffice” if the French-owned company came out on top.

Universal will be justifiably wary of Smith, whose opposition to the ill-fated Sony-BMG merger kept the issue rattling around the European courts for a couple of years.

That experience will also show her not to be too buoyed by EU Competition Commissioner Joaquin Almunia statements in Switzerland June 8, when he acknowledged the risks involved with Universal-EMI having so much market power.

She still said she welcomed the news of Almunia’s speech and expects to a strong statement of objections confirming the Commission’s earlier findings that Universal is a danger in the physical and digital market because it cannot be adequately constrained by competitors, customers or piracy.

The EC’s initial findings, which were published March 23, said it recognised that consumers must continue to have access to “a wide variety of music in different physical and digital formats at competitive conditions.”

Encouraging words from EC commissioners can be misleading. In 2007 Smith thought it was “truly incredible” that the EC passed the Sony-BMG merger without remedy, particularly as many commissioners had spoken out against it.

A year later when Sony and BMG split, Smith was still campaigning that they shouldn’t ever have been allowed to get hitched in the first place.

The EC has until Sept. 6 to rule on Universal-EMI. Whatever it decides, the likelihood of one side or another appealing the ruling means it’s hardly likely to be the end of the matter.