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By Vanessa Mock
BRUSSELS--Universal Music Group Inc. was granted more time to
respond to concerns from European Union regulators over the
company's proposed acquisition of EMI Group Ltd.'s recording arm
and now is expected to reply by Thursday night, people close to the
matter said Wednesday.
The company's request for an extension from a Tuesday deadline
signaled that Universal was busy responding to a raft of complaints
by antitrust regulators, set out in a document nearly 200 pages
long.
Universal, which is owned by the France's Vivendi SA, was
expected to submit its reply in time for the late-Thursday
deadline, a person with close knowledge of the matter said.
The European Commission, the EU's executive arm, has been
examining the $1.9 billion deal since February amid concerns that
it would create a music behemoth almost twice the size of its
nearest competitors in Europe. Both companies boast a string of
stars, with Universal's roster including Lady Gaga, Robbie Williams
and the Black Eyed Peas, and EMI's including Coldplay and the
Beatles.
The commission raised fears about the substantial market power
the new entity would have in physical and digital music sales. The
commission also has questioned Universal's assertions that its
bargaining clout with licensees has been eroded by the boom in
illegal music downloads and by online services such as Apple Inc.'s
iTunes and Amazon.com Inc. The commission also disputed Universal's
calculations of its market share.
"It's not surprising they have sought an extension, as the
statement of objections is very long and it demolishes most, if not
all, of Universal's work in how to proceed," a person familiar with
the matter said.
Universal is eager to resolve the matter soon. The company
agreed to pay EMI's owner, Citigroup Inc., the bulk of the purchase
price by Sept. 10, regardless of whether the deal gets the green
light. The commission shuts down for most of August, though it has
committed to delivering its verdict in September. The U.S. Federal
Trade Commission also is reviewing the deal.
People who have seen the statement of objections said the
commission pointed to antitrust concerns expressed by more than 20
EU countries as well as Norway and Iceland, which have access to
the bloc.
"There are worries in all the big countries in the EU,
particularly when it comes to the digital area," another person
said. Universal and EMI have a combined 40% of the European market
in digital music distributed by the two main online platforms,
iTunes and Spotify.
People close to the case have said Universal is likely to
request an oral hearing and that plans are afoot to hold a
closed-door hearing within the next 10 days.
The company would then have until July 18 to recommend
concessions, though that deadline could be extended to Aug. 1.
"Universal would have to make very substantial concessions to
get this through," one of the people with close knowledge of the
matter said. "Most probably, they would have to sell off individual
companies, as it can be hard to sell individual labels."
That cast doubt over media reports that Universal would seek to
offer so-called behavioral remedies, which are measures to ensure
it wouldn't abuse its market dominance with other players in the
sector. People close to the matter said the commission likely will
be reluctant to go down that route as such measures would be hard
to police and unlikely to go far enough.
A third person with close knowledge of the matter said Universal
remained eager to move ahead with the deal, even though the
resignation last week of Vivendi Chief Executive Jean-Bernard Levy
raised questions over whether the new management would be as
keen.