Some mergers just will not go away – even though the competition authorities have only turned them down quite recently. The Granada and Carlton tie-up is currently forcing the Competition Commission to consider allowing the creation of a dominant force in the TV advertising market – something they opposed only a few years ago.
It remains to be seen whether this merger can go through in an acceptable commercial form without a volte face on the part of the Competition Commission.
The news that BMG and Time Warner are at an advanced stage of discussions on merging their music interests could mean that the EC Commission will have to revisit the issue of whether less than five music majors is a tolerable state of affairs – something they appeared to rule out when they opposed the proposed Time Warner EMI merger several years ago.
Cynics will say that the expense of failing to obtain regulatory approval for a large merger again is so high that the companies will not have got this far without obtaining a favourable preliminary steer from the EU.
Whether this is the case or not, this merger is not so problematic as the EMI deal. BMG Music and Warner Chappell would together not have quite such a strong position in music publishing as Warner Chappell plus EMI would have had – a key feature in the EC Commission’s opposition to the Time Warner EMI proposal. Moreover, access of the vocal and innovative independents to the AOL dominated internet could be dealt with by undertakings – even if the merged company is not spun-off from AOL altogether.
Another factor is that after its Airtours court defeat, the EC Commission may have little appetite for overcoming the high factual burden of establishing a collective dominant position – particularly as the OFT concluded in its CD enquiry that the five majors did not have such a position.
It is therefore quite possible that this merger will go ahead despite the objections of the independents – subject to some divestment commitments to prevent dominant positions being created in particular markets and other undertakings on open access if there are to be any remaining links with AOL.
Should this happen, EMI will only have two potential suitors amongst the majors but will at least have some confidence that going down to three will not be ruled out by the regulators.