Consumer Groups Oppose Universal-EMI Merger in Letter to Congress

Public Knowledge and the Consumer Federation of America compare the music inudstry to the e-book market, citing a recent DOJ case

A pair of prominent consumer trade groups called Universal Music’s proposed $1.9 billion acquisition of EMI’s recorded music division a “threat to competition” in a letter to Congress and a U.S. regulator on Thursday.

Public Knowledge and the Consumer Federation of America, a nonprofit organization representing almost 300 consumer organizations, penned the letter to the Senate’s Committee on Antitrust, Competition Police and Consumer Protection, the House Judiciary Committee and the Federal Trade Commission. The FTC is reviewing the deal.

The two groups are urging closer scrutiny of the proposed merger, which would increase the market share of Universal, already the biggest label, to almost 40 percent. It would also shrink the number of major labels from four to three.

They compared the music industry to the e-book market, citing a recent Department of Justice case against price fixing by the major publishers along with Apple.

Also Read: Edgar Bronfman Vows to Fight Universal-EMI Merger 'Tooth and Nail'

“If five companies with a market share of less than 50% pose a threat to nascent competition from digital distribution models, does one company with a market share above 40% pose a similar threat?” Mark Cooper, director of research at the CFA, and Jodie Griffin of Public Knowledge wrote.

Universal argued that the comparison to the e-book industry was misguided.

"CFA's effort to compare this case to the Government's e-books case completely misunderstands the law," a Universal spokesman told TheWrap. "The e-books case is about an alleged illegal price-fixing conspiracy. Market shares don't matter in a case like that — it's just as illegal for two tiny local bookstores to fix prices as it is for giant publishing companies. The law governing mergers is totally different, and most mergers, like this one, are ultimately found to be beneficial to competition and consumers."

In terms of market share, many industry experts have argued that in this age of digital downloads, the iTunes Store and piracy, pure market share counts for less

Griffin and Cooper disagree.

“The post-merger market share of EMI-Universal is sufficient to give it the power to distort or even determine the fate of digital distribution models,” they wrote.

Though certain consumer groups will continue to fight this merger — and former Warner Music CEO Edgar Bronfman Jr. has vowed to do so as well — few see the deal having many regulatory problems in the United States. The real danger lies in Europe where the European Commission is still investigating the proposal.

European regulators have already approved Sony’s acquisition of EMI’s publishing division, but has not finished its overview of the Universal deal. Universal will have to shed some assets to gain approval, and it is in the process of doing so.

EMI’s recorded music division includes active artists like Coldplay and Katy Perry.