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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.