In the course of its investigation the Commission will examine
the effects of the transaction on the emerging business of music
distribution over the internet and on the markets for internet
dial-up access and paid-for content.
In a statement, the Commission said:
“The main competition issue raised by the
merger is the vertical integration of Time Warner content with AOL
on-line services. This matter is complicated by the fact that AOL
has recently entered into a joint promotion, distribution and sales
agreement with Bertelsmann, the German music recording, publishing
and broadcasting group. This agreement brings about a considerable
integration of the two companies' commercial activities. Therefore,
as a result of the merger with Time Warner, AOL will have
preferential access to the leading source of music publishing
rights and music repertoire in most Member States. It cannot be
excluded that, because of the strength of the music catalogue to
which AOL will have access, it will be able to dictate the
technical standards for delivering music over the Internet and
monopolise the music player software. This strategy could enable
AOL to play the role of the 'gate-keeper' in the emerging on-line
music distribution channel.”
As regards the internet, the Commission found that AOL, which
with a market share of almost 40% is the leading internet company
in the USA, is the only internet company with a presence in most
European Member States. During its investigation the Commission
will thus examine whether AOL could leverage its strong position in
America and its proprietary content and services to achieve
dominance in Europe, in particular, in a number of neighbouring
internet paid-for content markets, such as films, TV programmes and
financial news.
In order to ease the competition problems identified by the
Commission, AOL offered commitments aimed at severing a structural
link with Bertelsmann stemming from the European joint venture, but
they were insufficient to ease the competition concerns raised by
the transaction.
The Commission now has four months to investigate the facts and
to adopt a final decision whether or not to allow the proposed
transaction to proceed.
The Commission is also carrying out a full investigation into
the merger between Time Warner and the UK's EMI Group Plc in the
music sector.
