European Union Could Split Sony BMG

A day after announcing it was fining Microsoft 280.5 million euros for not complying with an antitrust ruling, the European Commission on Thursday said it planned to reevaluate the merger between Sony Music and BMG, and could end up splitting up the music company.

The decision surrounds a finding that the 2004 merger would not harm customers. Independent record label Impala filed a challenge stating European antitrust regulators made false assumptions that promotional discounts would inhibit the creation of a monopoly.

The European Court of First Instance agreed with Impala's assessment, saying, "The commission did not demonstrate to the requisite legal standard either the nonexistence of a collective dominant position before the concentration or the absence of a risk that such a position would be created as a result of the concentration."

As a result, Sony Music and BMG will have seven days to re-file documents to the EU Commission requesting permission to merge their music units once again. In the initial filings, the two companies said they needed to join to better fight declining CD sales due to illegal downloading from the Internet.

If the Commission does not approve the merger this time around, Sony BMG would be split apart. However, BMG said the EU's announcement would not have any impact on the joint venture. The company expects to discuss the matter with the European Commission within the next week.

The Commission could, however, fight the Court of First Instance ruling through an appeal. It has two months to make a decision on whether it will appeal or agree to reanalyze the merger.