EU regulators ask if merger will mean music price hike

Rivals and customers of Vivendi's Universal Music Group were asked by European Union regulators whether the company's acquisition of EMI Group's recorded music business would allow it to increase prices.

Regulators in Brussels asked whether Apple's iTunes, the largest online music store, and others could prevent record labels from co-ordinating prices, according to a document seen by Bloomberg.

Regulators also asked whether online music retailers could succeed without songs from EMI, including the Beatles and Amy Winehouse; and Universal, which represents Lady Gaga and Rihanna.

Universal last week sought European Commission approval to buy EMI's recorded music operations, which develop artists and profit from recorded songs. Vivendi's Universal agreed to buy EMI's recorded music business last year for US$1.9 billion ($2.26 billion).

"Please explain whether, in your view, after the acquisition of EMI, Universal would have the ability to raise the price for its recorded music" for music bought online or offline, the EU asked in the questionnaire, which had a deadline of February 24 for replies.

"We are comfortable that we can satisfy any concerns that might be raised," Universal said.

Regulators set an initial deadline of March 23 to rule on the deal.

Impala, a group of independent music companies, said this month that it expects an "outright no" from regulators to the deal because it would increase prices.

The group won a 2006 court ruling that overturned EU approval for Sony's and Bertelsmann's formation of the Sony BMG record label.

Universal's holdings account for 27 per cent of the recorded music market, while EMI represents 9.7 per cent, according to Sanford Bernstein analyst Claudio Aspesi.

The questionnaire, with more than 100 questions, also sought information on whether the shift to online services had reduced business costs that previously hampered smaller record labels.

The antitrust agency asked if artists could use online services such as Facebook as a substitute for record companies in promoting and distributing their music.

It also asked if Vivendi was likely to use its ownership of Universal and EMI to bolster its French mobile telephone unit, broadband internet business, online music service or its games division Activision Blizzard, which makes the Call of Duty video game.

Warner Music Group, an unsuccessful bidder for EMI, believes the Universal/EMI deal "would significantly impair the competitiveness of the recorded music and music publishing markets," chief executive Steve Cooper said this month.

Warner would lobby against the sale in the US and Europe, retiring chairman Edgar Bronfman said last month.

Will Tanous, a spokesman for New York-based Warner Music, declined to comment on the questionnaire. Warner Music has 12 per cent of the recorded music market.

The break-up of EMI, owner of Abbey Road Studios, ended a nine-month struggle over the future of the 114-year-old music company.

Citigroup last year seized London-based EMI from investor Guy Hands, who lost almost a third of his firm's €5.4 billion ($8.6 billion) buyout fund on the company.

The other half of EMI, the publishing business, which profits from musical scores and lyrics, was sold to an investor group led by Sony for US$2.2 billion.

- Bloomberg