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Universal Music’s EMI deal faces hurdles before it can be passed

Category : Business

Competition regulator concerned about dominance of The Voice and other TV shows and digital music prices

Europe’s competition regulator has told Universal Music that its £1.2bn bid to buy EMI faces a formidable number of hurdles to gain clearance – with the watchdog raising concern over the combined company’s potential domination of The Voice and other TV shows, the price of digital music and dominance of its acts on radio and elsewhere.

The scale of issues raised by the European commission’s almost 200-page statement of objections to the deal, which would bring together Universal artists including Lady Gaga and U2 with EMI acts such as the Beatles and Katy Perry, leaves parent company Vivendi weighing up whether to make large-scale concessions to gain a regulatory green light.

The European commission document is understood to have raised the spectre of “over exposure” that the enlarged Universal Music will get across all manner of media platforms and markets. If combined, the two companies would distribute 41% of music sold worldwide.

A particular concern of the commission’s is the share of airtime Universal artists would get on radio and key TV shows – it is understood that the Universal-dominated BBC talent show The Voice is raised as an example – where three of the four judges,, Jessie J and Tom Jones, are signed up to labels owned by the company.

It is understood that the commission has also raised concern about the amount of retail shelf space a combined Universal-EMI would be able to control – and whether the music major would have the market power to impose more onerous rights deals with digital music providers.

Although the EC’s statement of issues is private, it has been widely circulated to interested parties – including competitors. One critic of the bid who has seen the document, said they believed that the world’s largest music company will need to “pull a rabbit out of a hat” to win over regulators.

The EC document also challenges Universal’s claim that piracy will act as a counter measure to stop any one player controlling the digital music market, and that internet giants such as Apple, Amazon and Spotify have enough power to act as a counterweight to a music company of the enlarged group’s size.

It also questioned Universal’s attempt to deploy a different market share definition, which focuses on the labels it directly owns and runs, and excludes artists from their third-party independent labels it distributes. In the past, the commission noted, Universal had been happy to use the broader definition that includes indies, which gives it a larger percentage market share and is used by the global industry body, the IFPI.

Universal will submit its response to the commission by the end of the week, with owner Vivendi having promised to pay Citigroup, EMI’s current owner, the full purchase price regardless of the outcome of European and US regulatory clearance. “We are continuing to work with the commission to gain regulatory approval,” said a spokesman for Universal. “We will be submitting a detailed response to the statement which addresses the concerns of what is a procedural document.”

Parent company Vivendi was thrown into disarray last week when Jean-Bernard Lévy, chief executive for the last decade, abruptly resigned after a disagreement over the future strategy of the French media and telecoms group.

But company chairman Jean-René Fourtou has signalled Vivendi remains committed to a deal signed off by the whole board, and told Universal Music chief Lucian Grainge last Friday that the potential combination “is an integral part of Vivendi’s commitment to excellence in the field of creative content”.

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