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Despite an array of concessions offered by EMI Group PLC and Time Warner Inc. to gain European regulators’ approval for their merger, industry rivals Wednesday claimed the combined group could still dictate unfair prices for the use of its vast collection of music titles. Two executives in the European music industry claimed a combined EMI-Time Warner would own the rights to such a large catalog of music that it could command high fees for its use, or so-called synchronization rights. Synchronization rights, which allow for the use of a piece of music, for example, in a film or a commercial, must be bought from the music publisher and record company, such as EMI and Warner Music. In addition, agencies, known as collecting societies, collect royalties each time the song is broadcast. EMI-Time Warner did not include synchronization rights among the concessions offered Tuesday to European Commission regulators examining their $20 billion joint venture deal in an in-depth inquiry, according to industry competitors familiar with the situation. But one person in the music industry said, “There are no discrete asset sell-offs EMI and Time Warner could make to possibly address this problem.” Another source familiar with the matter said EMI and Time Warner have been “trying to work rings around the Commission” to get it to believe that concessions about collecting societies will satisfy regulatory concerns about synchronization rights. However, the source said, “synchronization rights have absolutely no bearing” on collecting societies. “Synchronization rights is a special market of its own, and on this market, the parties would be even more powerful following the merger than they are now,” said Isabelle Wekstein, legal counsel for the Union des Producteurs Phonographiques Francais Independants. “No one is insisting that the parties make any concessions to address this because there are no concessions that could help,” she added. Wekstein also said that the problem lies in the size of the companies’ combined catalog of music — the world’s largest, according to the Commission — which would put them “in a position to impose any financial conditions they would want.” The Union des Producteurs Phonographiques Francais Independants is among the six or so European industry groups the Commission has asked to air their concerns about the merger as part of its own analysis of competition issues. The Commission is consulting with competitors to determine whether the EMI-Warner concessions would ensure healthy competition after the groups’ merger. But competitors, several of whom acknowledged that they are still analyzing the concessions, say the concessions fail to completely address synchronization-rights worries. Whether the Commission accepts the argument that no concessions could remedy the competition problem regarding synchronization rights could determine whether it blocks the deal. EMI and Time Warner met a Tuesday midnight deadline to make a final offer of concessions intended to allay the Commission’s regulatory concerns. EMI-Time Warner declined to confirm the substance of the concessions. In a written statement released shortly after its offer, the company said only that EMI and Warner “have proposed a balanced set of remedies intended comprehensively to address the issues raised by the Commission.” Those concessions include shedding one record label each in France, Denmark, Greece and Spain, and four publishing catalogs including Virgin Songs, Magnet, Fazer and Nordiska, Reuters reported. In addition, the companies agreed to sell all their physical distribution facilities in Europe, dissolve certain joint distribution agreements and to allow collecting societies to continue collecting royalties for mechanical and performing rights for five years. The companies also gave assurances it would not favor America Online Inc.’s European affiliates and would make their music technologically compatible with other software music players. Finally, the music companies agreed to not to cooperate with other major companies in making music compilations. This last concession is targeted at allaying EU worries that the deal could lead to an oligopoly of four major players, including Seagrams Universal Music Group, Bertelsmann Music Group, Sony Music and Warner EMI, which would collectively control up to 85 percent of the market. The Commission has argued that the four major players could lead to collusive practices such as price-fixing and that the deal between EMI and Time Warner could lead to such an anti-competitive environment among the big music companies. The Commission has also cited Warner’s related deal with AOL, which is also under in-depth review, as an area of concern in the market for distribution of music over the Internet. Recent media reports, citing internal Commission draft decisions, have alleged that the Commission intends to block the EMI-Time Warner deal and the sister merger between AOL and Time Warner. But according to both the companies and the Commission, such internal documents are routine in in-depth merger reviews and serve to summarize the Commissions objections against a deal. “This is a normal part of the process with the EU. We are totally comfortable with where we are at this stage of the negotiations,” AOL and Time Warner said in a joint statement earlier this week. “We have made excellent progress and are confident the talks will conclude successfully. As we have said, we are on track to close in the fall.” Industry competitors that were asked to comment on EMI-Time Warner’s concessions — a Commission practice known as market testing — have until Friday to submit their evaluations. Between today and next Wednesday, the day of an EU advisory committee meeting, the Commission will draft its decision, based to a large extent on the market testing. The draft will be circulated to the EU advisory committee, a panel of competition experts representing all 15 EU member states, before the commission makes its final decision. Although the panel’s role is advisory, the Commission has generally followed the panel’s opinion. While no date has been set formal for a ruling on either Warner EMI or the AOL deal, a ruling on Warner EMI must come before Oct. 18 and on AOL before Oct. 24. Copyright (c)2000 TDD, LLC. All rights reserved.

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