Universal Music's $1.9 billion deal to buy smaller rival EMI's recorded music business is set to face objections from the European Union's competition authority and may have to make concessions to allay concerns about the combined group's power particularly in the digital market.
Universal, owned by French group Vivendi, has not so far offered any remedies to the European Commission, a person familiar with the matter told Reuters on Friday, after a senior official at the European Commission said it plans to issue a formal "statement of objections."
Universal in turn said it would work with the Commission to get the deal approved once the statement was made.
EU Competition Commissioner Joaquin Almunia's regulators have been conducting a full-scale investigation into the proposed merger, which would bring together Universal's stars such as Lady Gaga and Rihanna with EMI's catalogue which includes The Beatles and Pink Floyd, citing concerns about the combined group's potential high market share and increased market power.
"The next step is a statement of objections. We are now preparing a statement of objections," said the Commission official, who asked not to be identified because of the sensitivity of the matter.
EU COMPETITION CHIEF CONCERNED
The Commission has set a deadline of Sept. 6 to make a decision on the acquisition and sending the statement of objections would extend that deadline by about four months.
The EU regulators have asked rivals and consumer groups if the deal would result in higher prices and shut out competitors. The U.S. Federal Trade Commission is also reviewing the proposed combination.
Citigroup Inc is selling EMI in two parts, having acquired it after its previous owner, private equity fund Terra Firma, defaulted on loans owed to the investment bank.
The European Commission gave its approval in April to a consortium led by Sony to buy EMI's separate music publishing business.
But Almunia said on Friday he was still concerned about the size of a Universal and EMI combination.
"A company with a large and popular catalogue can have significant market power over digital platforms, which would have a keen interest to strike a deal with it," Almunia told the St. Gallen International Competition Law Forum in Switzerland.
He said regulators were getting ready to move to the next stage in the proceedings.
"Ultimately, we will need to make sure that, in this already concentrated market, the company that would emerge from the deal would not be in a position to shape the future landscape in the digital music market to the detriment of users and artists," he said.
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