The cards will be rebattues for some time

It is a decision historic for the record industry, and particularly severe for the Commission European, of the Court of first instance of the European Court of justice, based in Luxembourg, last Thursday. It set aside its decision, issued in July 2004, authorizing the marriage between Sony Music and BMG, operation, effective disk majors, who had given birth to the second world major of the disk behind Universal Music. The green light from competition from the Commission services, then headed by Commissioner Mario Monti, had been challenged in court by Impala, an association of mainly European producers 2.500. The argument developed by Impala tending to show that the Commission did not pushed far enough its investigations, to demonstrate the existence of a collective dominant position in the global market of disk four majors control about 80 of the market, has been widely adopted by the Court of Luxembourg.

In its judgment, the latter imposes in fact a real affront to the Commission, which it accuses, in very stiff terms, of not having its work of investigation in a folder of course very complex, but for which issues, both economic and cultural, are phenomenal. Whereas, in its statement of objections issued in June 2004, the Commission had issued the more vivid reserves to the project and certified the theory of collective dominance exerted by the majors of the disc, she had turned edge in making its decision, on the basis of any additional element. The tribunal notes that the Commission has not sufficiently investigated to prove the existence of a collective dominant position. "The theory (developed by the Commission, Incidentally) that promotional discounts have reduced the transparency of the market so as to prevent the existence of a collective dominant position is not driven to sufficiency of law and is vitiated by a manifest error of assessment.". "The elements on which this theory is based are incomplete and do not include all the relevant data that should be taken into consideration by the Commission", and notes the Court of Luxembourg. And the European Executive has not investigated the consequences of the merger on the disk, already highly concentrated market. "In regard to the possible creation of a dominant position collective after the merger, the tribunal criticises the Commission making an extremely brief examination and not be presented in the decision, only a few superficial and formal observations on this point", he added.

Review of the operation

The decision places once again the European Commission in a delicate position on a subject concerning competition. Responding immediately after the judgment of the Court, it must now reconsider the operation (see below).

The decision obviously filled joy independent producers, which, since the end of the 1990s, denounce rapprochement between major operations. To respond to the crisis of the disc related to the growth of piracy on the Internet, they provide that an industrial response: mergers. "It is a turning point in the history of the disk that will change the face of the world market of music," said the "Echos" Patrick Zelnik, co-founder of the French label Naïve and new Chairman of Impala. This is a huge victory for cultural diversity.

This grave decision also point appointed, at the time where the British EMI and Warner Music us negotiate in turn an amalgamation, the perspective appears today much more distant (see box).

Bertelsmann and Sony, the hour was Thursday last to timeout. "The judgment of today has no impact on the existence of the Sony-BMG joint venture." The joint company was established in 2004 after a thorough review of the European Commission under the force of the merger control rules. "We will examine the judgment in a careful manner and discuss next steps with the European Commission," said Bertelsmann last Thursday. But the new grave evil for the giant German media, which is currently negotiating the surrender of its music publishing division, and seeking precisely according to recurring rumours to opt out of Sony BMG which it holds 50 of the capital alongside the Japanese group. The cards will be rebattues for some time.