Time Warner, EMI Music Units’ Merger Could Face U.S. Challenge

U.S. antitrust enforcers may recommend a challenge to the proposed merger of the music units of Time Warner Inc. and EMI Group, a union that would create the world’s largest record company, people familiar with the review say.

The companies, meanwhile, expressed confidence they can satisfy antitrust concerns raised by European Commission regulators. European regulators told the companies that combining the music units--along with America Online Inc.’s proposed purchase of Time Warner--would create a dominant force in music recording, publishing and Internet delivery.

“The deal is going through its normal regulatory process,” said Time Warner spokesman Edward Adler. “We are in discussions with the regulatory authorities. The deal is on track to close by the end of the year.”

Time Warner shares on Tuesday rose $1.38 to close at $84.56 and America Online shares rose 94 cents to close at $57.75, both on the New York Stock Exchange.

Federal Trade Commission staff lawyers were poised earlier this year to challenge the combination of the two music units in court but held off pending the European Commission review, said people familiar with the FTC inquiry.

FTC lawyers are concerned that the venture--which would control more than 2 million popular-music copyrights dating to the 1940s--could lead to higher licensing fees for songs on movie sound tracks and TV, the people said. Together, the companies would control the lion’s share of popular songs from the 1960s and ‘70s.

Adler declined to say whether the companies would offer to divest rights to any popular music labels to alleviate FTC staff concerns. “We have compelling answers to all their questions and we are going to be providing answers to the commissioners,” he said.

AOL and Time Warner said they remain confident they can complete both transactions this fall. The deadline for an EU decision on AOL’s purchase of Time Warner is Oct. 24.