Even though the European Commission okayed the merger of Sony and the Bertlesmann Music Group (BMG) in 2004, Europe's second-highest court—the Court of First Instance—annulled the merger on July 13. The decision came about because of a challenge from independent record labels that claimed the EU regulators shouldn't have approved the merger in the first place. This is the first time a European Commission decision has been overturned and it requires the commission to examine the complex merger again.

Technically, the preceding sentence should have read that this is the first time that a decision by the newly reformed European Commission has been overturned, since its merger review procedures were restructured four years ago, following a string of remarkably similar reversals. The commission's new procedures were supposed to ensure that European authorities thoroughly and fairly examined complex multinational mergers. Experts predict that the re-examination of the Sony-BMG deal will need to be absolutely watertight—whether pro or con—to answer questions concerning the commission's ability to oversee such deals.

The commission does have the option to appeal, but analysts project that the court's assertion that the merger approval "was not supported by a statement of reasons of the requisite legal standard and was vitiated by a manifest error of assessment" was strong enough to discourage such an action.

The timing of the decision threw cold water on the hopes of many investors that Warner and EMI might merge. According to CNNMoney.com on July 12, Wall Street had been "aggressively bidding up shares of Warner Music Group and EMI Group," anticipating such a move. CNNMoney's Paul R. LaMonica was dubious that a merger was a winning proposition. The Court of First Instance's decision has many observers wondering if it's even possible.