Sony and Bertelsmann Music Group (BMG) have denied that they work together to fix CD prices and that a merger of the two record companies would reduce competition.

Last month the EC sent the companies a "statement of objections" detailing its concerns about the proposed merger. Competition Commissioner Mario Monti believes the deal would further reduce consumer choice. He is also concerned that savings in overheads made by the companies would not be passed onto customers in the form of lower prices.

According to the Commission, the movement of CD prices from the big five music companies shows evidence of "tacit collusion", if not actual cartel behaviour.

Sony and BMG have prepared evidence to counter the claims. They say that pressure from big retailers has increased pressure on prices to the benefit of customers.

The Commission will hear evidence Monday and Tuesday next week from the two companies. It aims to reach a decision by 22 July. Independent record labels have already threatened legal action if the EC allows the deal to go ahead. ®

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