European Union regulators on Friday cleared Universal Music Group's $1.9 billion bid for the recorded music division of EMI Group Ltd., but are demanding that Universal sells many of EMI's most treasured record labels and the accompanying global rights.
In addition, Universal committed to selling EMI's 50% stake in the popular Now! That's What I Call Music compilation JV and to continue licensing its repertoire for that compilation in the next ten years.
Universal finally committed not to include Most Favoured Nation (MFN) clauses in its favour in any new or renegotiated contract with digital customers in the EEA for ten years. MFN clauses oblige digital customers to extend any favourable term granted to Universal's competitors to Universal. This commitment will allow Universal's competitors to negotiate more freely with digital customers and further levels the playing field between these competitors and Universal.
In light of these commitments, the Commission concluded that competition on the digital music markets in the EEA will be adequately preserved and that the transaction will have no negative impact on consumers.
"Competition in the music business is crucial to preserve choice, cultural diversity and innovation. In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music. The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits." said Commission Vice-President in charge of competition policy Joaqu?n Almunia.
The proposed merger would bring together two of the four so-called global "major" record companies, leaving only three majors. The EC had concerns that following the merger, Universal would enjoy excessive market power vis-a-vis its direct customers, who sell physical and digital recorded music at retail level. In particular, the Commission focussed its investigation on the markets where record companies license their music to digital retailers such as Apple and Spotify. The Commission found that the proposed transaction, as initially notified, would have increased Universal's size in a way that would likely have enabled it to impose higher prices and more onerous licensing terms on digital music providers. This could have negatively affected the possibilities for innovative providers to expand or launch new music offerings and would ultimately have reduced consumers' choice for digital music, as well as cultural diversity in the European Economic Area (EEA).