The Federal Trade Commission yesterday cleared a planned merger between Sony Music Entertainment Inc. and BMG Entertainment, removing the last major hurdle to a partnership that will create the world's largest music company.
The European Union, which oversees BMG's German parent company, Bertelsmann AG, approved the merger last week. The two companies hope to complete the merger next month, creating a new goliath that would control more than 30 percent of the music market and bring powerhouse acts such as Bruce Springsteen, Dave Matthews and Usher under the same roof. Currently, Universal Music Group commands the world's largest collection of record labels, with about 26 percent of the global market.
"We now look forward to creating a global recorded music company comprising many of the world's most successful artists as well as a vast catalog of recordings," BMG said in a statement yesterday. "The company will be dedicated to developing and supporting an array of international as well as national artists."
The two companies said they needed to merge to fight the ongoing industry depression, in which music sales have dropped by nearly one-third in the past three years. The industry blames Internet and bootleg piracy for the plummet, while other groups fault the labels themselves, saying they price CDs too high and fail to develop appealing new acts.
The merger was opposed on antitrust grounds by Apple Inc.'s iTunes online music store; other music companies, such as Britain's EMI Group PLC, home of the Beatles; and Impala, a Brussels-based trade group representing several European independent record labels.
But neither the E.U. nor the FTC found evidence that a merger would drive up consumer prices or freeze out competition, though the new company's sheer size and past allegations that several major labels engaged in price-fixing did raise concerns.
"The industry is highly concentrated among record labels, and the proposed joint venture will only enhance this concentration," warned Democratic FTC Commissioner Mozelle W. Thompson, who nevertheless agreed to give the pairing the green light.
In 2002, the five major music companies -- Sony, BMG, Universal, EMI and Warner Music Group -- paid $143 million to settle a class-action lawsuit alleging CD price fixing in the 1990s, though the companies did not admit guilt.
The joint-venture merger includes only Sony's and BMG's recorded music divisions, leaving publishing divisions separate. Past music company merger tries, such as the 2000 attempt to merge Warner and EMI and the 2001 proposed union between EMI and BMG, were scuttled by Europe.