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Senators warn Universal-EMI deal poses 'significant competition issues'
The top Democrat and Republican on the Senate's antitrust panel urged the Federal Trade Commission (FTC) on Friday to closely scrutinize Universal Music Group's proposed purchase of EMI.
In their letter to FTC Chairman Jon Leibowitz, Sens. Herb Kohl (D-Wis.) and Mike Lee (R-Utah) did not take a position on whether the deal is legal, but said they are worried that it presents "significant competition issues."
The $1.9 billion merger would reduce the number of major worldwide labels from four to three and would give Universal Music, a division of French conglomerate Vivendi, control over the catalogs of artists such as the Beatles, the Beach Boys, Coldplay and Katy Perry.
Antitrust law bars any deal that would "substantially lessen competition."
The senators examined the deal during a June hearing of the Judiciary Committee's subcommittee on Antitrust, Competition Policy and Consumer Rights.
In Friday's letter, they urged antitrust regulators to take a close look at the deal's impact on digital music. The senators noted that critics warn the combined company could become a gatekeeper capable of killing off new online services.
They also asked regulators to evaluate whether the merger would raise prices for physical CDs.
Universal argues that the accessibility of music online, including through illegal pirate sites, limits the power of record labels to set prices.
The senators agreed that piracy has hurt music sales, but noted that many people now buy music through legal online sources, such as Apple's iTunes.
"The music industry has undergone a transformation in the last two decades as consumers access music through new online forms of distribution and as the market faces the challenge of piracy," the senators wrote. "Yet, in this as in other industries, robust competition remains the key to restraining prices, ensuring new and innovative forms of distribution, and maintaining diversity of choice available to consumers."
Universal has reportedly offered to sell off some assets to appease European regulators, who are also reviewing the deal.
Peter Lofrumento, a Universal spokesman, said the company "appreciates" the points the senators raised in the letter.
"Since this deal was announced, we have worked closely with the Federal Trade Commission to address many of these issues, and will continue to do so," Lofrumento said. "Our investment in EMI will create more opportunities for new and established artists, expand music output and support new digital services. We remain confident of earning regulatory approval."
—Updated at 12:03 p.m. to include a comment from Universal Music
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