Merger Gets EU Antitrust OK

European Union antitrust authorities have formally endorsed the giant merger between America Online Inc. and Time Warner Inc. after the companies provided legal guarantees they will not unfairly discriminate against their rivals, EU officials said Tuesday night.

The recommendation, signed by the EU’s chief trustbuster, Mario Monti, also provides specific pledges by the merger partners that they will divest themselves of certain European businesses. It clears the way for the deal to gain Europe-wide approval in a vote today by the 20-member executive commission that represents the EU’s 15 participating governments.

The merger, which would combine an Internet giant boasting 24 million customers with the world’s largest media and entertainment company, still must receive clearance from two regulatory agencies in the United States before it can be consummated.

Even though the commission was not scheduled to issue its decision until Oct. 24, the vote was moved up because most of the major legal obstacles have now been removed. During the course of intensive negotiations over the past few weeks, AOL and Time Warner agreed to an array of remedies to appease EU concerns about the need to sustain competition in new media and Internet markets.

The largest barriers in Europe to the $183-billion deal fell away last week when Warner Music and Britain’s EMI Group abandoned a separate joint venture. EU authorities feared the union could have enabled the AOL-Time Warner colossus to dictate technology standards and thus dominate future markets in the digital downloading of music from the Internet.

But just as important were a series of specific pledges from the merger partners.

AOL agreed to dissolve its European partnership with the German media giant Bertelsmann, which has held a 50% stake in AOL Europe. This proposed remedy thwarted a potential link between the music interests of Warner and a Bertelsmann affiliate, which EU officials worried could have concentrated too much power over the global music business in AOL-Time Warner in a manner similar to the failed EMI deal.

AOL also promised to revamp the shareholding structure of AOL France, which is jointly controlled with the French media concern Vivendi. Any continued dealings with Vivendi, EU officials said, would have triggered the same alarm bells about vesting too much control over the global music business in this kind of partnership.

EU officials also were troubled by the prospect that AOL would seek to use its market clout to browbeat content providers into unwanted arrangements. So AOL has pledged that for three years it will not compel those providers who want to sign a deal with AOL in the United States to make the same kinds of carrying commitments with AOL Europe.