Senators\' Letter to F.T.C. Adds to Pressure on Universal-EMI Deal

By BEN SISARIO

Putting further pressure on the Universal Music Group in its $1.9 billion bid for EMI Music, the leaders of a Senate committee sent a letter on Friday to the Federal Trade Commission, saying that the deal “presents significant competition issues” and asking the agency to examine it closely.

“We believe this proposed acquisition presents significant competition issues that merit careful F.T.C. review to ensure that the transaction is not likely to cause substantial harm to competition in the affected markets,” said the letter, signed by Senator Herb Kohl, Democrat of Wisconsin, who is the chairman of the Judiciary subcommittee on antitrust issues, and Mike Lee, Republican of Utah, who is the subcommittee's ranking minority member.

“In the course of this review, we also urge the commission to be mindful of the changes in the music industry in the last decade, particularly the shift to online distribution as the preferred way consumers purchase music,” the senators added.

The letter reviews many of the major concerns raised by critics of the deal, like the possibility that it would give an expanded Universal an unfair advantage in negotiating deals with digital services and in dealing with retailers of CDs, which still represent a majority, albeit a shrinking one, of the industry's sales.

Universal, the largest music company in the world, releases music by thousands of artists including Lady Gaga, U2, Eminem and Lil Wayne. EMI, whose roots go back to the late 19th century, releases recordings by the Beatles, Pink Floyd, Katy Perry and Coldplay. If Universal's acquisition of EMI is approved, its market share would grow to 40 percent, unless it agrees to shed some assets.

In response to the senators' letter, Universal said in a statement on Friday: “We appreciate the points raised in the joint letter from Chairman Kohl and Ranking Member Lee, as well as the commi ttee's recognition of the historic changes in the music industry over the past decade. 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. 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.”

The F.T.C. is currently investigating and has given no indication of when it might issue a decision on the merger. Regulators in Europe have until Sept. 27 to rule on it.

The letter from Senators Kohl and Lee follows a hearing in June at which some of the major players in the music business sparred over what effect the deal might have and over larger questions about the music industry like whether major record labels still have a dominant market position in the Internet age.

The merger has divided the mus ic industry in complicated ways.

The Warner Music Group, which would end up as the smallest of the three remaining majors, has opposed it vigorously, as have some consumer advocate groups. Independent labels, which once presented a united front against it, have lost their unanimous opposition as some prominent figures have come out in support. And in the United States two major powerful labor unions, the American Federation of Musicians and SAG-Aftra, have also registered their support.

Last month, to overcome the objections of the European Commission, Universal agreed to sell off about two-thirds of EMI's holdings in Europe. So far, Universal has not offered to expand those concessions with full worldwide rights, but depending on the demands of the F.T.C. it might have to make further divestments.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.