In 2004 the EC authorised the creation by Sony and Bertelsmann of Sony BMG, the second largest global recorded music business. The EC initially expressed concerns in its preliminary statement of objections (SO) that the transaction would strengthen a collective dominant position between Sony BMG and three other music “majors” (Universal, Warner Music and EMI). However, additional evidence submitted by the parties regarding price competition alleviated the EC’s concerns. The EC’s decision was challenged before the EU Court of First Instance (CFI) by Impala, an association of independent production companies, and was annulled by the Court. In its 2006 ruling the Court castigated the EC for clearing the transaction notwithstanding the serious competition concerns identified in the SO. The CFI dismissed the EC’s analysis as “extremely cursory” and “without supporting detail”.
The EC, together with Sony and Bertelsmann, appealed the CFI’s ruling before the European Court of Justice (ECJ). The ECJ sitting in a Grand Chamber (13 judges instead of a regular chamber of three or five judges) set aside the CFI’s judgment. The Court emphasised that the EC was free to depart from its initial findings in the SO provided that it could rely on sufficiently robust evidence. The Court also found that the CFI had misconstrued the legal criteria of collective dominance and that the EC had met the relevant standard of proof in dismissing the risk of tacit collusion. The ECJ referred the case back to the CFI for reconsideration.
While this litigation was pending, the parties re-notified the Sony BMG joint venture and the EC approved it for the second time. Impala has recently appealed this new clearance and the CFI now has to review two authorisation decisions relating to the same transaction.