The European Union's antitrust chief on Thursday approved a merger between Sony Music Entertainment Inc. and Bertelsmann AG's BMG Entertainment after a review failed to support charges that the deal would harm consumers by raising CD prices, according to people familiar with the negotiations.
The decision came after two days of closed-door hearings at which the companies argued against claims -- pressed by many small independent labels -- that the deal would not only raise prices but also stifle the development of online music stores.
After reviewing the results, EU antitrust chief Mario Monti and his team agreed they did not have sufficient evidence to oppose the merger, the insiders said, speaking on condition of anonymity. An official announcement was expected as early as Friday.
The deal still faces an antitrust review in the United States.
Spokesmen for Sony Music and Bertelsmann declined to comment. The deal would leave four large companies controlling about 80 percent of the music market. Sony-BMG and current No. 1, Vivendi's Universal Music Group, would each have about a quarter. The others are EMI Group PLC and Warner Music Group.
In a sealed statement of objections sent last month, the European Commission expressed fears the deal could exacerbate "tacit collusion" in the industry, leading to higher CD prices and less diversity in a market where there is already too little competition.
The commission, citing similar concerns, opposed a deal between EMI and Warner four years ago.
As in that case, small independents opposed the Sony-BMG deal, arguing at a news conference last week that the merger would further reduce their ability to get shelf space for their artists, hurting cultural diversity in Europe.
The commission also voiced concerns about the impact of the deal on the emerging market for online music and devices in Europe, according to those familiar with the case.
Sony operates a new music-downloading service called Sony Connect, and there are worries that it could hamper competing services by restricting access to its stable of talent.
Sony artists include Aerosmith, George Michael and Barbra Streisand, while the BMG stable features Avril Lavigne and Elvis Presley.
Apple Computer Inc. executives, who launched their iTunes online music service in Europe this week, were among those testifying at Tuesday's hearing.
Sony and BMG argued that market conditions had changed dramatically since the ill-fated EMI-Warner deal, and that the new alliance would help cut costs and ensure investment in new artists.