The European Commission has sent out a particularly detailed questionnaire to parties with an interest in Universal’s bold EMI bid, gauging opinions on the mega-major’s recent proposal of wide-ranging concessions to counter concerns over the market dominance of a combined Universal/EMI. As previously reported, those concessions would include selling whole EMI units in some European territories, and the Parlophone and Chrysalis businesses in the UK.
Although the EC was always going to take Universal’s proposals to those who had previously expressed concern about the EMI deal, insiders say that the 30 page questionnaire that went out last week is unusually detailed. It also specifically asks whether the proposed divestment package “includes a sufficient proportion of Anglo and/or American repertoire”, indicating concerns that, if allowed to keep all of EMI’s US operations, Universal could still be too powerful in Europe, despite off loading half the EMI business there, simply because of the importance of key American artists.
As previously reported, artist and indie label groups in the States, while officially still opposed outright to Universal’s purchase of the EMI record company, are also lobbying regulators there to force dramatic divestments in line with those now on the table in Europe, even though US competition officials have traditionally been less demanding when green lighting music industry mergers. Universal may, as yet, not be able to keep hold of the whole of EMI’s lucrative Capitol division Stateside.
Of course on both sides of the Atlantic opinion is divided in the indie label community regards the combination of Universal and EMI, with some indie chiefs supporting the deal, especially if it results in catalogues going on the block which they can then bid for.
It’s not known what Naïve Records’ Patrick Zelnik – one of the first high profile indie label bosses to break rank and support the deal – now thinks, given Virgin Records is not on the list of possible sell-offs. Former Virgin exec Zelnik hoped to join with Richard Branson to buy the EMI division. Though Ministry founder James Palumbo remains a supporter, penning another piece in favour of Universal’s deal for the Sunday Telegraph this weekend.
He wrote: “Now we are facing a backlash to a deal that promises to rebuild EMI. Universal will be gaining market share, enjoy benefits of scale, be able to negotiate better deals, [critics] protest. But so what? The music ship is in choppy seas. Fighting on deck won’t help navigate the storm. The capacity for people in the music business to battle against each other rather than deal with the challenges appears to be never-ending”.
Of course, somewhat ironically, Universal’s promises to rebuild EMI after a decade of turmoil, and three and a half years of disastrous private equity rule, might be hard to fulfil, especially in the UK, if most of the EMI UK business is carved up for sale in order to get deal approval. It’s still not clear if EMI UK’s Virgin division, pretty much all Universal would retain here under the current plan, would be big enough to justify running as a standalone entity within the Universal UK empire.
Meanwhile, back in the States, two senators from the Congressional Subcommittee on Antitrust, Competition Policy & Consumer Rights, which held a high profile hearing on the Universal/EMI deal in June of course, have sent a letter to the Federal Trade Commission, which is investigating the deal in America. It doesn’t say much we didn’t already know, but does conclude: “Without reaching any final judgment as to the legality of the deal under the antitrust laws, we believe this proposed acquisition presents significant competition issues that merit careful FTC review to ensure that the transaction is not likely to cause substantial harm to competition in the affected markets”.
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