SONY AND BMG CONTESTING EC’S COLLUSION CLAIMS

Ahead of a hearing before the European Commission scheduled for early next week, Sony Music and BMG are sending, as early as today, detailed evidence meant to disprove EC allegations that major music labels have engaged in “tacit collusion” in the form of price fixing in the European Union, the Financial Times reports.

The EC expressed concern that the proposed Sony-BMG joint-venture merger would increase the level of what it views as collusion in its formal statement of objections to the merger, issued late last month.

The would-be merger partners are said to have compiled data showing that the rise of mass merchants has placed the power to set prices squarely in their hands, thanks to the volume of product they buy. This situation, Sony and BMG are said to argue, has led to average price reductions in the EU of at least 5%, while in Germany, Italy and Spain, prices have gone down 10% or more.

"In the UK, supermarkets sell at lower than wholesale prices. Market forces, not collusion, are keeping prices in a similar area because all prices are moving downwards," the FT quotes one executive involved in the merger as saying.

"The evidence is not consistent with price co-ordination," another person close to the deal told the paper.

European independent label group Impala has said it is considering legal action if the EC does not block the Sony-BMG tie-up, arguing that the music market is already concentrated in the hands of too few companies, who continue to try to elbow out the little guys.

Following next week’s hearing, during which Sony and BMG will give oral arguments supporting their case, the EC will convene its “devil’s advocate” panel to internally scrutinize its case against the merger. The two companies will then have until June 22 to propose possible solutions to any objections still identified by the Commission.

Sony and BMG may be considering licensing part of their back catalogs to third-party labels as one form of concession, the FT says.

A final EC decision on the merger is due July 22.