The music industry may be in for a fist fight.
In a letter to FTC Chairman Jonathan Leibowitz, Kohl and Lee outlined “significant competition issues that merit careful FTC review,” including the access to music by online distributors, control over retail pricing, and the ability of independent recording labels to survive in an increasingly concentrated environment.
The subcommittee has no formal authority over mergers, but in late June it summoned Universal Music Group CEO Lucien Grange and EMI head Roger Faxon, who appeared before the subcommittee alongside critics of their proposed merger.
There was significant disagreement among panelists about how much of the market for recorded music a combined Universal-EMI would control, and the extent to which this new market power would give the company control over pricing in physical stores, and control over the future of upstart digital distribution and streaming platforms that want to compete with iTunes, Spotify, Amazon, and others. The subcommittee chairman and ranking member opted to send a joint letter, said Emily Bennion, Lee’s press secretary, because the disputed factual record meant neither office could reach its own legal conclusion about the deal.
The letter details the areas of dispute without taking sides, but significantly it puts the U.S. market share by revenue for the combined company at 40 percent, which would transform the U.S. recorded-music market from “moderately concentrated” to “highly concentrated,” according to an analysis from the American Antitrust Institute that was included in the record of the hearing.
The European Union has its own problems with the deal, and is negotiating the divestiture of some of the Universal catalog as a condition of approval, with music by Radiohead, the Kinks, Pink Floyd, and other artists on the block. A music-industry executive close to the deal speculated that the FTC might be looking for European antitrust regulators to do their work for them.