The leaders of the Senate Antitrust Subcommittee Friday urged the Federal Trade Commission to critically examine Vivendi SA's contention that the $1.9 billion deal for EMI Music by Vivendi's Universal Music Group is a move necessary for the major music publishers to remain competitive in the digital age.
Sens. Herb Kohl and Mike Lee, the chairman and ranking Republican on the subcommittee, said that despite increasing market share gained by independent publishers, the deal could reduce competition digital music distribution services and could possibly make Universal a "greater gatekeeper of digital distribution platform success."
In Friday's letter to FTC Chairman Jonathan Leibowitz, the two senators said, "We urge the commission to pay close attention to the impact of this deal on digital music distribution services in assessing competitive consequences."
The two senators said the subcommittee's hearing on the deal in June showed "considerable factual disputes about . . . whether this acquisition would make Universal a greater gatekeeper of digital distribution platform success, whether EMI is presently more open to licensing new services and whether Universal has been hostile to such licensing such services in the past."
The lawmakers stressed that they had nor drawn any conclusions about the merger's likely effect on competition but said reaching a bottom line on those disputes will be vital in the FTC's decison-making.
The senators also urged the FTC to examine the effect of the deal on independent labels and new artists, which the companies argued have been gaining clout.
"The music industry has undergone a transformation in the last two decades as consumers access music through new online forms of distribution and as the market faces the challenges of piracy," the lawmakers wrote. "Yet in this as in other industries, robust competition remains the key to restraining prices, ensuring new and innovate forms of distribution and maintaining diversity of choice available to consumers."
Critics of the deal have suggested that the 40% share of the recorded music market UMG would have after the merger would transform its catalog into a "must have" library for any digital service. As a consequence, the critics predict Universal/EMI would become a bottleneck with the ability to block the launch of any new digital services or to force onerous contract terms on them.
The critics have also suggested that EMI fulfilled a maverick road in the industry in being first to try digital distribution content deals and its disappearance could reduce the willingness of major labels to license their portfolio to digital services.
Merger proponents and the companies argue the large number of new sources for digital downloads and the high amount of digital piracy lessens any possibility UMG could wield additional clout. UMG also said it could bolster EMI, a label that has been in decline.