FTC okays Universal's $1.9B purchase of EMI

The Federal Trade Commission unconditionally approved Universal Music Group's $1.9 billion purchase of EMI on Friday.

The announcement came hours after European regulators also gave the companies permission to merge. But unlike the FTC, the European Commission imposed tough conditions, forcing Universal to sell off about a third of EMI's assets.

Critics warn that the merger, which will reduce the number of major worldwide labels from four to three, will stifle competition in the music industry and lead to higher prices for consumers.

But the FTC concluded that the two labels did not have enough head-to-head competition to raise serious competition concerns. In a statement, Richard Feinstein, the director of the FTC's Competition Bureau, said Universal is strongest in popular new releases while EMI, the smallest of the four majors, has a catalog weighted toward older titles.

Critics had warned that the combined label would have such an extensive catalog of artists that no music-streaming service could survive without reaching a licensing agreement with it, giving the combined label veto power over new, innovative services.

But the commission concluded that streaming services must carry the music of all the majors to be competitive and that EMI would not have served as a substitute for Universal's music. 

The FTC decided that no remedy was necessary, but Feinstein noted that the concessions obtained by the European Commission will also reduce concentration in the United States market.

In a statement, Universal said its purchase of EMI "will create more opportunities for new and established artists, expand music output and consumer choice, and support new digital services."

The European Commission forced Universal to sell off EMI's Parlophone label, home to popular artists including Coldplay, Lilly Allen, David Bowie and Pink Floyd.

But Universal will still gain control over the works of the Beatles, Katy Perry, Robbie Williams and Norah Jones.

Sen. Mike Lee (R-Utah), the top Republican on the Senate Judiciary Committee's subpanel on antitrust issues, said he was satisfied with the decision.

"In dynamic markets such as this one, in which innovation is constantly changing the means of production and distribution of music, government regulators must be careful not to intervene without evidence that a merger will harm consumers," he said, adding that the FTC's decision appears to "be fact-based, well-reasoned, and focused on consumer welfare."

But Public Knowledge, a consumer advocacy group that opposed the deal, said it was "incredible" that the FTC did not take any action to restrict the scope of the merger.

"UMG can now use those holdings not just to raise prices for consumers, but also to create a new tax on innovation among digital music services," Jodie Griffin, a Public Knowledge staff attorney, said in a statement. "Handing more market power over to incumbent gatekeepers is not the way to encourage new digital music services, and the FTC should have stepped in to protect consumers and musicians."

—A previous version of this article misspelled Richard Feinstein's name