At the beginning of January 2004, Bertelsmann AG and Sony notified the European Commission of their intention to create a joint venture to which Bertelsmann would contribute the worldwide recorded music business of its wholly-owned subsidiary Bertelsmann Media Group (BMG), and Sony would contribute its worldwide recorded music business, with the exception of Japan, operated by Sony Music Entertainment (IP/07/272). On 18 July 2004, the Commission provided its clearance to the joint venture, however IMPALA, the Independent Music Companies Association, appealed to the Court of First Instance to annul the decision. On 13 July 2006, the CFI allowed the appeal on the ground that essential elements of the Commissions assessment were not adequate. Following the annulment, the transaction was re-notified and the Commission started a new in-depth investigation in March 2007. The assessment was to be carried out under the old Merger Regulation 4064/89, applicable to agreements signed before 1 May 2004. Thus, the investigation had to consider whether the joint venture was likely to produce or increase a dominant or collective dominant position in the territory of the European Union as it was before 1 May 2004. In the press release that detailed the outcome of the new investigation (IP/07/1437), it was stressed that the Commission had considered the developments that the market for recorded music had experienced since 2004, and had decided to carry out its investigation in relation to those years also, with particular attention to the impact of digital music exploitation. The criteria according to which the new assessment was carried out were those established by the CFI in the Airtours decision (T-342/99). Therefore, the Commission had to look at:
1. whether there was sufficient transparency in the market to spot collusion;
2. if credible retaliation mechanisms existed for the members of the agreement to use in case a party deviated from the colluding strategies; and,
3. whether competitors or consumers were in a position to undermine the effects of any such collusion.
Accordingly, the Commission undertook a large and complex econometric analysis, which looked at all net prices, discount and wholesale prices for all CD chart albums sold by all major companies to all of their customers in the EEA between 2002 and 2006. The goal of the operation was to detect examples of possible collusive behaviour. Together with the assessment of the pricing policies, the Commissions investigation was on the lookout for other suspicious activity related to elements such as budgets, chart album prices, access to retailers, access to airplay, chart rules, release dates and coordination of publishing activities. Thus, the Commission accepted the CFIs decision and this time took a more systematic approach to analysing the joint venture. Nevertheless, the Commission maintained its position and cleared the joint venture on the ground that no evidence of coordinated behaviour prior to the merger or as a result of it had emerged. It is too early to elaborate on the future obstacles that such a joint venture may encounter, but this case is further proof that the persistent trend in the industry to move towards concentration is unlikely to fade away any time soon.