Reuters: Regulatory News: Senators urge FTC to tread carefully on Universal-EMI deal

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Senators urge FTC to tread carefully on Universal-EMI deal Aug 3rd 2012, 18:17 Fri Aug 3, 2012 2:17pm EDT * Sens. Kohl, Lee tell FTC deal presents "significant" issues * Senators: Competition issues merit "careful FTC review" * Universal seeks to acquire EMI unit in $1.9 billion deal * Universal says confident it will get approvals By Sarah N. Lynch and Diane Bartz WASHINGTON, Aug 3 (Reuters) - The Democratic chairman and the ranking Republican on the U.S. Senate's antitrust panel urged the Federal Trade Commission on Friday to carefully scrutinize Universal Music Group's proposed acquisition of a big chunk of rival EMI. In a rare show of bi-partisanship, the letter from Senate antitrust subcommittee chairman Herb Kohl, a Democrat, and Republican Mike Lee comes on the heels of a June 21 hearing to examine the $1.9 billion deal. While Kohl and Lee refrained from drawing any conclusions about whether the proposal violated antitrust law, they told FTC Chairman Jon Leibowitz the acquisition "presents significant competition issues that merit careful FTC review to ensure that the transaction is not likely to cause substantial harm to competition in the affected markets." Their six-page letter outlined the panel's findings from its investigation into the proposed transaction, which was announced in November. A spokesman for University Music Group said in acknowledging the Senate panel's letter that the company had expected a thorough review of the deal and that it was working closely with the FTC to address the issues. "We remain confident of earning regulatory approval," the spokesman added. U.S.-based Universal, owned by Paris-based Vivendi , offered to buy EMI's recorded music unit from Citigroup. Combining Universal Music Group, which has a star lineup of Lady Gaga and Rihanna, with EMI's recorded music unit, whose catalog includes Katy Perry, the Beatles and Pink Floyd, would give the already powerful company a 40 percent share of the U.S. market. As part of its review of the deal, the FTC has been making inquiries about the pricing power of retailers like Apple and Amazon, who use low-priced songs to attract customers for more expensive goods. It is also asking about allegations made by consumer groups and others that Universal has been reluctant to license its enormous catalog of must-have music to digital startups, or has licensed the music only on onerous terms. "We also urge the commission to be mindful of the changes in the music industry in the last decade, particularly the shift to online distribution as the preferred way consumers purchase music," Kohl and Lee wrote. In Europe, where the deal is also facing scrutiny, Universal has also been working to allay competition concerns. Last week, Universal said it had come up with concessions that should help satisfy European Union antitrust regulators. Both the FTC and European regulators have approved a Sony-led consortium's purchase of the other piece of EMI, EMI Music Publishing. That deal was worth $2.2 billion. While Kohl and Lee's subcommittee has oversight over the FTC, it has no formal role in determining whether it should receive antitrust approval. Link this Share this Digg this Email Reprints

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