Antitrust group asks for Universal, EMI deal to be stopped

WASHINGTON Thu Aug 30, 2012 5:55pm EDT

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WASHINGTON (Reuters) - An independent antitrust group urged U.S. regulators on Thursday to stop Universal Music Group's plan to buy EMI Music's labels for $1.9 billion because it says the deal would give Universal too much power in the music industry.

The independent American Antitrust Institute said the planned purchase raised substantial concerns because it would reduce the number of major music companies to three from four, and would give Universal life-or-death power over digital entrants that rely upon being able to license music.

The group also noted the merged company's dominance -- it would have had a total of 51 of the Billboard Top 100 titles for 2011.

"We urge the Federal Trade Commission to enjoin the transaction and preserve EMI as a fourth major music label in the already concentrated recorded music industry," the group said.

The AAI also argued that divestitures would be inadequate to protect consumers from higher prices.

Universal agreed to buy EMI's recorded music unit from Citigroup for $1.9 billion in November 2011 largely because of its catalog of artists like Pink Floyd and Queen. Such older music accounted for two-thirds of EMI's global sales in fiscal 2011, and it generates higher margins than new artists since promotional costs are lower.

Next month, Vivendi, which owns Universal, must pay Citigroup £1.1 billion ($1.7 billion), whether the deal is final or not.

Universal disagreed with the AAI view, calling the music industry "intensely competitive."

"Our acquisition of EMI will create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services. We are working closely with the Federal Trade Commission and remain confident of regulatory approval," Universal spokesman Peter Lofrumento said in an emailed statement.

A combined Universal-EMI would sell a huge library of current top-selling and legendary artists such as Jay-Z, Kanye West, U2, Katy Perry and the Beatles, and would control more than one-third of the global market.

Europe's antitrust regulators are worried that the new group would be almost twice the size of its next-largest competitor in Europe. Universal Music is trying to work out a divestment plan with European Commission regulators that could see it give up record labels including Virgin Music, EMI Classics and Chrysalis.

Rivals to the deal including Warner Music Group and independent record labels have also complained that the combined company would have too much market power.

European regulators must decide in September whether to approve the deal. The FTC has no deadline.

(Reporting By Diane Bartz; Editing by M.D. Golan)

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