The European Union's competition regulator on Friday launched an in-depth probe of Universal Music Group's planned acquisition of part of the iconic British music company EMI — home to The Beatles, Coldplay and Katy Perry.
Universal Music, which is owned by French media company Vivendi SA, announced in November that it would buy EMI's recorded-music division for $1.9 billion. At the same time, a consortium led by Sony Music's Sony/ATV said it would pay $2.2 billion for EMI's publishing arm.
The deal has been vehemently opposed by rivals such as Warner Music and small independent music labels, which fear that Universal and Sony would dominate a market that is already under strain from illegal music downloads.
In its statement Friday, the Commission indicated that those concerns may be justified.
Buying EMI's recorded-music arm would make Universal almost twice the size of its next-largest competitor in Europe, the Commission said.
Notably, it added that even the threat of music piracy did not appear to be a sufficient constraint on the new company.
"The proposed acquisition could reduce competition in the recorded music market to the detriment of European consumers," the EU's Competition Commissioner Joaquin Almunia said in a statement. "The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions."
Universal said the in-depth probe had been expected. "We will continue to cooperate fully with (the Commission) and look forward to a successful resolution of the process," it said in a statement.
The Commission now has until Aug. 8 to decide whether to clear the deal. If the in-depth investigation confirms its concerns, Vivendi — which has already announced that it will sell some €500 million ($662 million) in noncore assets — could offer to sell off more assets to secure the deal.
EMI was put up for sale by Citigroup, after the bank foreclosed on private equity firm Terra Firma, which bought the music company for $6.8 billion in 2007.
The Commission will decide on April 2 whether to also take a closer look at Sony's side of the deal.