European Commission Looking into MusicNet, Duet

The European Commission isn't especially fond of joint ventures by international media conglomerates. Last year, the EC successfully squashed a proposed merger of EMI and Warner Music Group on the grounds that WMG's parent company, AOL Time Warner (then simply Time Warner), combined with the UK's biggest name in music, would create "a virtual monopoly" of the European music market. A few months later, merger discussions between EMI and Bertelsmann Music Group (BMG) similarly went nowhere. EC investigators also looked into price-fixing in the European CD market early this year.

Now the commission is looking into the possibly monopolistic effects of online music ventures MusicNet and Duet, both of them jointly supported by members of the so-called "Big Five"—EMI, BMG, Warner Music, Vivendi Universal, and Sony Music, companies that together control 85% of the global market in recorded music. The rise of joint ventures like MusicNet and Duet could threaten the livelihoods of independent music producers, who have complained that power plays by the big labels could shut them out of opportunities to expand their operations to the Internet. MusicNet is a subscription-based Internet music service developed by RealNetworks, Inc. in cooperation with EMI, AOL Time Warner, and Bertelsmann AG. Duet is a similar service being jointly developed by Vivendi Universal and Sony.

Speaking at a press conference in Stockholm on Monday, June 11, antitrust commissioner Mario Monti commented, "These are important cases for the development of music services offered online to consumers, and there are potentially a number of issues which merit close examination." At the same conference, Mr. Monti announced the launch of his organization's probe into possible price gouging on DVDs sold in Europe, as the result of the film industry's region coding policy.

The EC is so powerful that a mere investigation can yield results without any formal charges being filed. Music wholesalers and retailers changed their pricing policies on CDs almost immediately after the commission announced that it was looking into the price-fixing problem.