Sony-BMG Merger Challenged

The merger of Sony Music and Bertelsmann Music Group (BMG) may not be a done deal after all.

On Wednesday, November 4, a trade association representing approximately 2000 small European record labels announced that it would appeal the merger approval granted in July by European Union (EU) commissioners. Impala, as the association is known, contends that the merger concentrates too much power and market control in too few hands.

Impala will make its case before the EU's high court. Should its petition succeed, EU regulators would have to reverse an unconditional approval and order the two partners to separate their joint operation.

"The threat of a duopoly operating in the business without any real constraints is too great for any serious company or sector to ignore," said Impala vice president Alison Wenham, also CEO of a British "indie" alliance called the Association of Independent Music, representing 800 companies.

Consolidation has gone too far in the music industry, Impala charged, noting that 80% of the global market for recorded music is controlled by four giants: EMI Group PLC, Sony-BMG, Vivendi Universal SA, and Warner Music Group (WMG). Such control favors superstar artists while minimizing exposure for those who are less well known, according to indie spokesmen.

Impala's official challenge to the merger could be heard as soon as mid-year 2005, but the litigation process could drag out over more than two years, according to the Associated Press.