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Europe to say no to AOL, Time-Warner, EMI merger

The deal will hurt competition, European Commission reckons

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The European Union looks set to block AOL's $132 billion acquisition of Time-Warner, and the latter's' music label merger with EMI, on the grounds that the deals, if allowed to go ahead, would be anti-competitive.

According to a leaked preliminary ruling from the European Commission, the merger "would create a dominant position in the markets for online music delivery, music software, Internet dial-up access, broadband Internet access and integrated broadband content as a result of which effective competition would be significantly impeded...

"The more content AOL acquires and the bigger its community of users, the less reasons for a subscriber to abandon AOL's walled garden and the more reasons for potential Internet users to join AOL," claims the Commission.

Which is, of course, largely why AOL wants to buy Time-Warner. That and the fact that it can buy Time-Warner - there's a degree of 'new economy beats old economy' pissing competition about this. There's also the fact that, sooner or later, Net connectivity will become so ubiquitous that AOL will have to remodel itself purely as a content company, and the best way of doing that is to become a media company. That process will be helped along by buying a media operation in the meantime.

The issue, then, is what AOL does with all that content. The EU - and, indeed, a number of both companies' major rivals - reckon that AOL could limit the accessibility of its content to those willing to pay for its connectivity offerings.

Says the Commission report: "AOL could refuse to distribute third-parties' film content or threaten to refuse to distribute in order to negotiate the most advantageous commercial terms."

AOL and Time-Warner representatives have promised to keep these sides of the business separate, ensuring fair access to competitors, but as the Microsoft antitrust case showed, keeping two separate but closely connected operations - in MS' case, operating systems and applications - sufficiently far apart isn't easy.

The leaked report is only a preliminary document, and the Commission will meet representatives from AOL, Time-Warner and EMI before it has to make an official pronouncement on the mergers. The verdict on the EMI/Warner merger will take place before 18 October, and on the AOL/Time-Warner by 24 October. Commission insiders, however, reckon the organisation's decisions will be revealed by 4 October, according to Reuters. ®

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