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Groups Warn Congress of Dangers In Universal Music Group-EMI Merger

April 26, 2012

Consumer
Federation of America (CFA) and Public Knowledge today told key lawmakers that
the planned merger between Universal Music Group and EMI would give the
combined company “the power to distort or even determine the fate of digital
distribution models.”

In a
nine-page letter to the leaders of the Senate Antitrust Subcommittee, CFA and
PK noted that the combined market share would have a market share of more than
40 percent, far above the five companies targeted by the Justice Department in
the agency’s recent suit against publishers alleging price-fixing for e-books.

The
Federal Trade Commission (FTC) is reviewing the Universal-EMI deal, the groups
noted, adding:  “Even if the FTC
does not believe that a 40+% market share alone gives a single company the
power to determine the life or death for these emerging models, it certainly
makes it very easy for that company to lead the effort to do so.  With a post-merger three-firm market share
of 90%, and with one or two companies following the lead of the dominant firm,
the market would be vulnerable to anticompetitive harm resulting from conscious
parallelism.”

By
several measures of industry concentration, the proposed merger “exceeds the
levels” which “potentially raise significant competitive concerns” and which
“warrant scrutiny,” the groups said, noting that the merger would move the
market for recorded music sales from “unconcentrated” to the “moderately
concentrated range.”

The
letter also discussed music pricing, arguing that prices are still too high for
consumers and disputing the notion put forward by the industry that price
pressure from “piracy” would keep the new company from exercising market power.