EU courts tear up Brussels ruling on Sony BMG

EU judges have attacked and overturned a European commission green light to the 2004 merger of Sony and BMG.

The European court of justice has used damning language to condemn Brussels investigations into the competition effects of creating the world’s second largest music company.

“The commission did not demonstrate to the requisite legal standard either the non-existence of a collective dominant position before the concentration or the absence of a risk that such a position would be created as a result of the concentration,” said the court.

Sony BMG now has seven days to re-approach the commission asking for a clearance to the merger.

EU competition officials will then have a month to decide but must use old European merger regulations that were in force in March 2004.

“The effect of this ruling is that the parties will have to re-notify the commission and the commission will have to conduct a new analysis,” said a spokesman.

“The new analysis will be based on today’s market conditions and take full account of the ruling. It will be covered by old merger regulations.”

Commission officials have played down – for now – any comparisons with a series competition reversals four years ago that led to reform.

“It is far too early today to draw policy conclusions,” said the spokesman.

The EU court of first instance has described in harsh words an “extremely cursory examination and [the commission] for having presented in the decision only a few superficial and formal observations”.

“The commission’s examination was inadequate,” said an ECJ statement. “At the hearing it was not in a position to indicate the slightest step which it had completed or undertaken.”

The case has serious ramifications for future music mergers and moves to join
EMI  and Warner Music.

Japan’s Sony Music and Germany’s BMG Bertelsmann announced in November 2003 plans to merge and create a business with operating sales totalling €5.3 billion a year.

On January 9 2004 the companies notified the proposed concentration under the name Sony BMG.

On May 24 2004, the then competition commissioner Mario Monti gave a provisional conclusion that the merger was incompatible with EU rules.

But after hearing representations from Sony and BMG, the commission changed its mind on July 18 2004.

The decision was challenged in the EU courts by Impala, an international association of 2500 independent music production companies, in December 2004.

The commission can appeal the court of first instance judgement.

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