EU Objects to Merger of Sony, BMG Labels

The European Commission objected Monday to plans by entertainment giants Sony Corp. and Bertelsmann to combine their music units.

The merger of Sony Music, whose artists include Beyonce Knowles and Bruce Springsteen, and BMG, home to Britney Spears and Elvis Presley, would create one of the top firms in a $30-billion industry that has lost a fifth of its sales since 2000.

The commission issued a statement of objections, which is confidential and provided only to the parties involved, as part of its investigation into the proposed transaction. People familiar with the document said it asserted that the market share of the combined entity would be too large.

Sony BMG, as the proposed 50-50 joint venture is being dubbed, would rival market leader Universal Music, leapfrogging Warner Music Group, the record firm recently acquired by Edgar Bronfman Jr., and Britain’s EMI Group.

Sony BMG’s combined share of the market was 25.2% in 2002, the most recent year for which data are available, just below Universal’s 25.9%, raising eyebrows among European Union trustbusters. The commission has set a deadline of July 22 to decide on the transaction.

In a statement, Germany-based Bertelsmann said it “welcomes the clarity this step will give to the debate and remains confident about demonstrating, in addressing the remaining concerns, that the merger will not impede competition.”

Sony said in a statement from London, “We remain confident that the European Commission will ultimately find that the Sony-BMG joint venture is a pro-competitive response to the challenges faced by the recording music industry.”