Warner Music and EMI today withdrew their merger proposal after
learning that, while the European Commission is expected to clear
the $135 billion merger of Time Warner with AOL, it planned to
block the proposed $20 billion music joint venture, in spite of the
recent offer by EMI to sell its Virgin Records interests.
The European competition commission had expressed concerns that
a combination of AOL, Time Warner and EMI could dominate the market
for the digital distribution of music. AOL and Time Warner had
already undertaken to not discriminate against rival service
providers in on-line music distribution for a period of five
years.
The commission has to make its formal decision on the Time
Warner/AOL deal by 24th October, although reports suggest the
decision is likely to be made at a meeting next week. It is
possible for Warner Music and EMI to now submit a fresh proposal on
different terms. The companies have already said they will continue
discussions with each other, the European competition commission
and other regulators in an attempt to regroup and get the deal
through.
How the Commission investigates mergers and acquisitions
The European Commission investigates mergers and acquisitions
according to a legally binding timetable. From the date the
Commission is fully informed of the details of a transaction
(so-called notification), it has a period of one month to make an
initial assessment. If the Commission comes to the conclusion that
there are serious doubts whether an operation is compatible with
the competition rules in the European common market, it initiates a
full investigation.
The Commission has then a further four months to investigate the
facts and to adopt the final decision whether or not to allow the
proposed transaction to proceed. The opening of a full
investigation is a procedural step without prejudice to the final
outcome of the case.
