Commission, September 21, 2012, No M.6458

I. THE PARTIES

(1) Universal Music Holdings Limited ('UMHL') is a wholly-owned subsidiary of Universal International Music BV, which is the parent company of the Universal Music Group ('Universal' or the 'notifying party', UK). Universal is the world's leading recorded music company. It is active in the discovery, development and promotion of recording artists (so-called 'artists & repertoire' or 'A&R') and in the wholesale of recorded music. It also has activities in other fields, such as online music retail, music publishing, artist management, merchandising, event management, and event venue services. Universal is ultimately owned by Vivendi SA.

(2) Vivendi SA ('Vivendi', France) is Universal's ultimate parent company. Vivendi is an international media company whose activities include telecommunications, the creation and distribution of content and TV channels, digital music retail and videogames.

(3) EMI Group Global Limited ('EMI Group', UK) is active in the discovery, development and promotion of recording artists and in the wholesale of recorded music. EMI Group also has activities in other fields, such as music retail, music publishing, artist management and merchandising.

II. THE OPERATION

(4) On 17 February 2012, the Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation, by which the undertaking UMHL acquires, by way of purchase of shares, control within the meaning of Article 3(1)(b) of the Merger Regulation of the recorded music assets of EMI Group.

(5) On 11 November 2011, Vivendi and Universal, on the one hand, and EMI Group, on the other hand, entered into a Share Purchase Agreement pursuant to which Universal would acquire EMI Group's activities in A&R and in the wholesale of recorded music, as well as EMI Group's retail recorded music activities, certain limited publishing rights (mainly those held by EMI Christian Music Group) and artist management and merchandising activities. For the purpose of the Commission decision, the assets subject to the proposed transaction are together referred to as 'EMI'.

(6) As a result of the proposed transaction, EMI would be solely controlled by Universal. The transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. The transaction has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

III. SUMMARY

(7) After examination of the notification, the Commission adopted a decision on 23 March 2012, concluding that the operation falls within the scope of the Merger Regulation and raises serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement. The Commission therefore decided to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

(8) On 19 June 2012, a statement of objections was addressed to the notifying party pursuant to Article 18 of the Merger Regulation. Universal replied to the statement of objections on 6 July 2012.

(9) In order to address the competition concerns identified in the statement of objections, the notifying party submitted commitments on 27 July 2012. The time limit for the adoption of a decision pursuant to Article 8 of the Merger Regulation was therefore extended by 15 working days pursuant to Article 10(3) of that Regulation. The notifying party offered a new set of commitments on 13 August 2012, which were subsequently amended on 25 August 2012.

IV. EXPLANATORY MEMORANDUM

1. Introduction

(10) The centre of gravity of the proposed transaction is the recorded music sector, as this comprises the core of the activities of each of Universal and EMI. The recorded music sector in the EEA today is characterised by the presence of four worldwide record companies (Universal, Sony, EMI and Warner; together the so-called 'majors') and a large number of significantly smaller record companies (the so-called 'independents' or 'indies').

(11) The recorded music industry as a whole has experienced a significant decrease in music sales in the last decade both globally and in the EEA as a result of the availability of music via legal digital services as well as digital piracy. Despite this decline hitting the physical sales most severely, sales of physical music still account for around 80 % of total music sales in the EEA. Sales of digital music are expected to significantly increase over the next years and to reach a tipping point where they will exceed sales of physical music.

(12) The value chain in the recorded music sector begins with the discovery and development of artists and the subsequent recording of their music, with a view to exploiting the copyright in the resulting sound recordings, an activity known as A&R. Success or failure in A&R is key to success in the markets for recorded music.

(13) The next level of the recorded music value chain comprises the sale or licensing by record companies of their repertoire to wholesalers and retailers, as well as to certain categories of end users (namely TV and radio broadcasters).

(14) Recorded music includes a wide variety of physical products (such as CDs - singles, albums/compilations - and DVDs - audio and video) and digital products, sold by the record companies to retailers which, in turn, resell them to end users. In addition, record companies can also license their repertoire to audio or video digital streaming service providers.

(15) There are various categories of physical retailers (in addition to wholesalers, which act as intermediaries between record companies and retailers), of which the main types are hypermarkets/supermarkets (so-called 'mass merchants'), e-tailers and specialist retailers.

(16) Regarding digital retail channels, the principal means of online music dissemination are through downloading and streaming. Downloads currently account for the large majority of online revenues. Streaming services are, however, on the rise and many market participants expect streaming revenues to grow significantly in the future.

(17) Streaming technology has also allowed for new platforms and business models to develop over the last few years. Internet service providers and mobile network operators increasingly offer music streaming services, either by developing their own branded services (often bundled with telecom subscriptions) or via partnerships with existing streaming platforms. Some streaming services also have partnerships with social networking sites. Finally, cloud music services that offer users the ability to store their acquired music on remote servers have emerged.

2. The relevant markets

A. A&R

(18) In its previous decisions relating to the recorded music sector (2), the Commission never defined an upstream market for A&R. It is, however, the case that A&R services are provided to different market players (artists) and entail a different organisation within record companies compared to the downstream wholesale activities. There are also certain competitive dynamics, which are specific to A&R.

(19) The Commission concluded that it is not necessary to take a view as to whether A&R activities should be considered and analysed as a separate product market or even whether the recorded music market should be viewed as a two-sided market, where the strength of a record company on one side of the market (A&R) has a positive influence over its market position on the other side of the market (wholesale of recorded music) and conversely. The strength of record companies in A&R was taken into account by the Commission in the competitive assessment of the proposed transaction as one of the key factors contributing to record companies' market position in the market for the wholesale of recorded music and vice versa.

B. Wholesale of recorded music

(20) The Commission in the past identified separate product markets for the wholesale of physical music and of digital music (3). Within the digital music market, the Commission left open the question whether there are separate product markets for digital music delivered for online applications and mobile applications, or for downloading and streaming. The Commission also did not identify separate product markets based on genre (e.g., pop, classical, jazz, etc.) or for single artist albums and compilations. The market investigation in this case has not revealed any new material element which would justify departing from these precedents.

(21) The Commission concluded that audio music and video music belong to the same product market for the wholesale of recorded music (whether physical or digital).

(22) The Commission concluded that a separate product market should be identified for the wholesale of recorded music to end users licensing recorded music from producers' music licensing companies. As regards retailing of recorded music, the Commission did not consider it necessary to take a view on the definition of a relevant product market.

C. Music-related activities outside the recorded music sector

(23) In line with its precedents, the Commission concluded that manufacturing and logistics activities fall outside the scope of its assessment. In addition, the Commission did not take a view on the definition of a relevant product market for other 'ancillary' services (such as artist management services, merchandising and live show and event management services). Finally, the Commission concluded that online publishing rights should be considered as a separate product market.

D. Geographic scope of the market

(24) The Commission concluded that the market for the wholesale of physical recorded music is national in scope.

(25) As regards the wholesale of digital recorded music, the Commission did not consider it necessary to take a view on the exact geographic market definition given that the transaction raised concerns on both an EEA-wide and national levels.

(26) The Commission did not consider it necessary to take a view on the definition of a relevant geographic market regarding A&R, retail of recorded music, ancillary services and music publishing.

E. Piracy

(27) The notifying party claimed that there should be a single market encompassing the wholesale of recorded music in both physical and digital formats, comprising both legitimate and unauthorised supplies of music (that is, to say piracy). In support of that claim, the notifying party argued that there is strong evidence of substitution by consumers between these music formats and sources, including between pirated and authorised music.

(28) The Commission has never considered in its past decisions that legal and illegal music belong to the same product market. However, the market investigation in the Sony/BMG case (4) revealed that piracy exerts a competitive constraint on record companies in certain territories.

(29) The Commission concluded that assessing the degree of substitution between legal and illegal music and the extent to which consumers mix and match between legal and illegal music is not relevant to determine whether illegal music should be considered as part of the market for the wholesaling of recorded music. This reflects the fact that, regardless of whether legal and illegal music are to be considered as substitutes from the point of view of end users, they do not appear to be substitutes from the point of view of the record companies' direct customers - physical and digital music retailers. By the same token, pirate services do not compete with record companies. They are not active in A&R and they are not active in the wholesale supply of recorded music to physical and digital customers.

(30) Thus, the Commission concluded that it is not appropriate from the demand or from the supply side, to consider legal and illegal music as part of the same relevant product market for the wholesale of recorded music. However, this conclusion is without prejudice to the analysis made by the Commission of piracy as a possible out-of-market constraint on record companies' pricing and output decisions in the context of the competitive assessment of the proposed transaction.

3. Competitive assessment

A. Horizontal non-coordinated effects

Market shares

(31) The Commission's theory of harm in this case is not predicated on a particular market share threshold being exceeded. Indeed, the Commission makes clear that market shares are but a first indication of market power and must be put into the overall context of the relevant markets. In line with the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings (5) ('Horizontal Merger Guidelines'), a significant impediment to effective competition is likely to arise in cases where the merged entity would have an appreciably larger market share than the next competitor post merger. It is therefore the indication that market shares give of the overall post-merger strength of the merged entity and its relative position to its competitors after the merger that drives the Commission's competitive assessment in this case.

(32) The analytical framework is all the more relevant in this case given that no industry source gives a completely reliable view of the merged entity's position post merger. Whilst in previous decisions relating to the recorded music industry the Commission used IFPI data, in this case the notifying party strongly contested the use of IFPI data and argued it is unreliable, providing alternative 'market share' data based on iTunes and Spotify sales as well as retail sales data gathered by GfK and the OCC.

(33) The Commission ultimately considered all data sources, including wholesale data gathered from various digital service providers. Furthermore, the Commission carried out a relativity exercise between the four majors on a hypothetical market consisting only of the four majors in order to assess Universal's and EMI's market position vis-à-vis the other majors (the independents, albeit together holding a not unsubstantial market position, cannot be viewed as a single entity). Finally, the Commission also took into consideration what chart data and radio airplay data showed, although this data cannot be equated to market shares.

(34) Following the analysis of all the data sources, the Commission concluded that the proposed transaction would result in the creation of a dominant 'super-major' twice (or even three or more times, in certain Member States) the size of its next largest competitor at the EEA level and in several Member States as well as Iceland and Norway. In more detail, in respect of physical recorded music, the merged entity would be more than twice the size of the next largest competitor in at least eight Member States - Cyprus, the Czech Republic, Ireland, Luxembourg, the Netherlands, Romania, Sweden and the United Kingdom, as well as Iceland, three or more times larger than the next largest competitor in at least five further Member States - Belgium, France, Greece, Poland and Slovakia as well as Norway, and more than four times larger than the next largest competitor in Bulgaria, Estonia and Lithuania. In Slovenia, the merged entity would become the clear leader among the majors. In respect of digital recorded music, the merged entity would be twice or more the size of the next largest competitor at the EEA level and in at least 16 Member States - Austria, Belgium, Bulgaria, Estonia, France, Greece, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Sweden and the United Kingdom as well as Iceland and Norway.

(35) In conclusion, the merged entity would have been the undisputed market leader by a distance post merger. From a structural point of view and on the face of market shares and the chart and radio airplay data, the existing competitive dynamics, which are based on a certain balance of power between, at least, the majors (despite Universal's already existing market leadership), would be completely altered by the proposed transaction in favour of the merged entity.

EMI as competitor

(36) The Commission concluded that EMI is one of the four majors currently active in the recorded music sector worldwide, with a significant artist roster and music repertoire comprising a formidable back catalogue and strong new releases. EMI is also likely to be Universal's closest competitor in relation to at least classical music. The proposed transaction therefore would result to the elimination of an important competitive force from the relevant markets.

Customers' limited possibilities of switching supplier

(37) The Commission concluded that post transaction, the merged entity's repertoire will (continue to) be 'must have' and customers will therefore likely have limited (if any) ability to switch supplier and the merged entity's ability to exploit customers will likely significantly increase.

Anti-competitive effects on digital distribution of music

(38) The Commission's investigation showed that Universal already before the proposed transaction has the ability and incentive to obtain licensing terms and conditions from digital customers that are more favourable to Universal as compared to those obtained by its competitors. These conclusions are based on three sources of evidence: (i) the comparison of the respective agreements of Universal and EMI with online platforms; (ii) evidence from the Commission's market investigation; and (iii) evidence from the merging parties. The evidence from each of these sources is further corroborated by the quantitative analysis undertaken by the Commission.

(39) First, the Commission conducted a review of the commercial agreements of each of Universal and EMI with a selection of key digital customers, focusing on key commercial terms (including remuneration, the level of advance payments that digital customers need to make, commitments in relation to promotion and advertising and most favoured nation ('MFN') clauses). This analysis showed that Universal on the whole obtains better terms on various key parameters of negotiations with digital platforms as compared to EMI and that this difference is particularly marked for smaller platforms (download and streaming).

(40) The Commission concluded that the differences in the contractual terms that Universal, which is already the largest recorded music company in the EEA, and EMI currently obtain constitute an indication of the likely negative effects on competition of the proposed transaction. Indeed, the substantial increase in Universal's size post merger, would be likely to increase Universal's bargaining position further, thus potentially resulting in not only the extension of Universal's current terms to EMI repertoire, but to an overall increase in the terms for the combined repertoire.

(41) The Commission also carried out a quantitative analysis with a view to assessing whether, due to the increased size of the merged entity, the proposed transaction is likely to increase the merged entity's bargaining power vis-à-vis digital customers and, as a result, to lead to higher prices for these customers.

(42) To this end, the Commission gathered digital music sales data from six major digital customers, as well as from six recorded music companies, across several Member States. The Commission then carried out a quantitative analysis of this data, essentially consisting of testing through statistic and econometric tools, whether there is a positive correlation between the size of a recorded music company and its ability to extract better terms from digital customers.

(43) This analysis demonstrated that: (i) the rent that recorded music companies can extract increases with their size (measured in terms of the share of revenues that a recorded music company's repertoire contributes to an online platform); (ii) this effect is particularly pronounced for relatively small online platforms, but is also present in platforms with significant bargaining power; and (iii) there is a positive relation between the size of a recorded music company's repertoire and the wholesale price it negotiates with online platforms.

(44) The Commission's conclusions based on the analysis of the commercial terms and conditions the merging parties have with various digital customers and on the quantitative analysis were corroborated by submissions that digital customers and other third parties have made throughout the Commission's investigation, as well as by certain Universal internal documents.

(45) The Commission thus concluded that, due to its increased size in the wholesale of recorded music to digital customers, the merged entity would likely apply worse commercial conditions, including higher prices, to digital customers if the proposed transaction were to go ahead in the form originally notified.

Control share analysis

(46) The Commission considered that, in order to assess the degree of market power held by the merged entity vis-à-vis digital music retailers following the proposed transaction, it is also necessary to consider the merged entity's combined market position in the recorded music and in the music publishing sectors. The Commission considered control shares as an 'aggravating factor', which exacerbates the anti-competitive effects of the proposed transaction deriving from the combination of the merging parties' activities in the recorded music sector (which, in and by themselves, are sufficient to give rise to competition concerns). The control share analysis carried out by the Commission reinforced the Commission's findings that the proposed transaction would likely lead to a significant impediment to effective competition.

Effect on consumer choice and innovation

(47) The Commission concluded that the proposed transaction would likely decrease innovation and consumer choice in two ways: (i) the proposed transaction would likely increase Universal's bargaining power and ability to impose onerous licensing terms on digital platforms, in particular small and emerging innovative music platforms. Such onerous licensing terms are likely to have a negative impact on the development of these customers and their ability to geographically expand to the various digital markets; and (ii) the merged entity would likely have an increased ability and incentive to influence the business model and characteristics of new digital music services and impose price increases on the retail market(s). As a result, the proposed transaction will also have a negative impact on cultural diversity. The Commission therefore concluded that the proposed transaction would likely decrease innovation and consumer choice.

(48) The Commission concluded that these findings apply equally to the market for the wholesale of recorded music at the EEA level, as well as in each of Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom, as well as in Iceland and Norway.

Foreclosure of competitors from the markets for the wholesale of physical and digital music

(49) The Commission also investigated whether the proposed transaction could give the merged entity the ability and the incentive to partially foreclose the merged entity's competitors from the markets for the wholesale of physical and digital music, as well as from A&R, to the detriment of competition and, ultimately, consumers, and cultural diversity.

(50) Such foreclosure could potentially take place through the ability and incentive of Universal, due to its increased size post merger, to guarantee to its artists significantly better access to promotional opportunities (e.g., exposure at mass merchants, and digital customers, access to compilations and to radio airtime) than its competitors, including to an extent greater than its actual market share.

(51) Increased access to all these promotional opportunities could result in the merged entity being able to sign the best artists, including at better conditions than other record companies, by offering them greater access to promotion. Competitors could find it increasingly difficult to compete with the merged entity to sign new artists which in turn could weaken these competitors' position vis-à-vis customers as their repertoire would become less attractive and, conversely, strengthen the merged entity's position giving rise to a self-perpetuating vicious circle.

(52) Ultimately, however, the Commission concluded that there are not sufficient elements to prove to the requisite legal standard that the transaction would be likely to result in foreclosure of competitors. In any event, the commitments proposed by the notifying party, whilst solving the anti-competitive effects described above in relation to commercial terms with digital customers, would also solve any foreclosure concerns.

Piracy

(53) The Commission concluded that the existence of piracy would not deprive the merged entity of its ability and incentive to exercise its bargaining power vis-à-vis retailers after the proposed transaction. While piracy may reduce the size of the overall market, the Commission concluded that there is no evidence that it would constrain recorded music companies in their commercial behaviour today or post merger.

Buyer power

(54) The Commission concluded that customers would not be in a position to exert buyer power as a countervailing factor to an increase of the merged entity's market power.

Entry

(55) The Commission concluded that it is unlikely that a timely and sufficient entry by competitors in the relevant recorded music markets would counter the anti-competitive effects arising from the proposed transaction.

B. Coordinated effects

(56) The Commission concluded that the markets for the wholesale of recorded music are not prone to reach easily a common understanding on the terms of coordination, given their complexities. This assessment remains unchanged considering the change brought about by the proposed transaction.

C. Vertical and conglomerate issues

(57) The Commission concluded that the transaction does not raise any concerns of a non-horizontal nature related to Universal's and EMI's activities in digital retail distribution, physical retail distribution, music video services, electronic communications, TV and film production and distribution, games and interactive entertainment and events ticketing services.

D. Conclusion

(58) The Commission concluded that the proposed transaction, as notified, would lead to a significant impediment to effective competition, in particular as a result of the creation of a dominant position, in the markets for the wholesale of digital music at the EEA level, as well as in 24 Member States, namely: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom, as well as Iceland and Norway.

4. Commitments

(59) The notifying party submitted formal commitments on 27 July 2012 which were put to the market test the same day. Overall, the market test showed that the commitments of 27 July 2012 presented a number of significant shortcomings which would have to be addressed.

(60) The Commission informed the notifying party of the results of the market test on 9 August 2012 at a state of play meeting. To address the shortcomings identified by the Commission, taking into account the results of the market test as well as further information provided by the notifying party on the proposed commitments, the notifying party offered a new set of commitments on 13 August 2012 which were subsequently amended on 25 August 2012.

(61) The main improvements to the package of 27 July 2012 consisted of: (i) additional owned content (Anglo repertoire as well as Danish and Spanish repertoire); (ii) the addition of EMI's share in a previously carved-out French entity Play.on; (iii) divestment of worldwide rights (as opposed to EEA-wide in the commitments of 27 July 2012); (iv) a commitment to sell at least two thirds of the package (EMIRL, Pink Floyd and the local entities) to a single purchaser; (v) requirement that the purchaser should be a company in a group which is either currently or was previously active in the recorded music or music publishing industry; (vi) a commitment not to re-sign artists whose repertoire is included in the package for a period of 10 years; and (vii) the behavioural commitments included in the commitments of 27 July 2012 and which were considered too complex and vague were replaced by a simple commitment not to include most favoured nation ('MFN') clauses in Universal's favour in any agreement with any legal digital service provider to the extent such an agreement applies to the EEA. This commitment was given for a period of 10 years. At the Commission's request, the notifying party also removed the commitment to terminate two licensing/distribution agreements with third parties.

(62) The commitments of 25 August 2012 therefore consist of: (i) the divestment of the worldwide rights for certain EMI and Universal assets consisting of both Anglo and local repertoire; (ii) the termination of one licensing/distribution agreement; and (iii) the behavioural commitment not to include MFN clauses in the merged entity's future contracts with digital services.

(63) The proposed commitment package includes the divestiture of the following legal entities/assets:

(a) EMI Records Limited ('EMIRL'): this includes: (i) all artists signed to EMIRL (including in particular the label Parlophone), with the exception of Virgin-branded artists and the Beatles which are the subject of a reverse carve-out; (ii) the EMI Classics and Virgin Classics-branded artists signed to this legal entity; and (iii) the Pink Floyd catalogue;

(b) EMI labels: Chrysalis Records Limited (excluding the Robbie Williams catalogue), Ensign Records Limited and Mute Records Limited;

(c) the following local EMI and Universal entities: EMI Belgium, EMI Czech Republic, EMI Denmark, EMI France, EMI Norway, EMI Poland, EMI Portugal, EMI Spain and EMI Sweden and Universal Greece;

(d) EMI's 50 % stake in the 'NOW' compilation business; and

(e) Universal label businesses: Sanctuary Records Group Limited, Co-op Music Limited, King Island Roxystar Recordings AB and MPS Records, as well as Universal's 40 % share in Jazzland Recordings (a joint venture).

(64) The total size of the final commitments (which include mostly EMI assets and some Universal assets) represents around two thirds of EMI's EEA business.

(65) In terms of the market share impact of the final commitments, the Commission reiterated that market shares are but a preliminary indication of market power and are not in themselves determinative of whether or not a transaction results in a significant impediment to effective competition. To this end, it is not necessary to identify any specific market share level under which the merged entity must remain in order for the significant impediment to effective competition to be removed.

(66) That being said, the Commission notes that post divestment, the increment to the merged entity's overall market share (including both physical and digital) at the EEA level would be significantly reduced: the divestment package represents a market share of about (5-10) % on the market for the wholesale of digital music, which means that Universal would acquire an additional market share of around (0-5) % and therefore increase its EEA-wide market share from (30-40) % to (30-40) %.

(67) In terms of market share on a national level, the divestment effectively reduces the increment brought about by the addition of EMI to Universal in every Member State as well as Iceland and Norway. The package contains significant Anglo repertoire which cuts across all Member States as well as Iceland and Norway. In addition, the local repertoire being divested in Belgium, the Czech Republic, Denmark, France, Norway, Poland, Portugal, Spain and Sweden further reduces the merged entity's post-transaction market shares to levels that no longer clearly indicate a significant increase in the market power that Universal already has today.

(68) In addition to the divestment of recorded music assets, the notifying party committed to terminate its distribution agreement with the third party record company Ministry of Sound and not to enter into any licence/distribution agreement with Ministry of Sound in the EEA for a period of 10 years from the adoption of the Decision.

(69) Finally, the notifying party committed for 10 years to refrain from including any clauses in Universal's contracts with digital customers to the extent they apply to the EEA which would require those customers to guarantee to Universal commercial terms that are better, equivalent to or at least as good as those agreed with another recorded music company (the MFN commitment).

Assessment of the commitments of 25 August 2012

(70) The Commission's assessment of the commitments is based on all available evidence, including the results of the market test and detailed information provided by the notifying party as regards the contents of the remedies package, in particular details relating to the artists contracts (future delivery obligations, length of contracts, remaining retention period on catalogues and change of control/assignment clauses). The Commission carried out its analysis against the criteria for acceptable remedies in merger cases contained in the notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (6).

(71) The Commission concluded that the final commitments submitted by the notifying party are of a scale and nature such as to decrease Universal's market power on a sustainable basis so that no significant impediment to effective competition arises as a result of the proposed transaction. This is because the assets included in the package represent a substantial portion of the overlap, are composed of an adequate mix between owned assets, distribution/licensing deals and compilations and are of good quality (i.e. likely to continue to generate future revenues). Furthermore, the fact that two thirds of the package will be sold to a single purchaser that already has industry experience will strengthen the counter-balancing effects of the divestment. Artists will have a strengthened competitor to go to and Universal's ability to extract more onerous commercial conditions from digital service providers will not increase.

(72) The Commission therefore concluded that the final commitments of 25 August 2012 remove the significant impediment to effective competition.

(73) Any concerns arising from the potential marginalisation of competitors (in both the digital and physical space) as a result of a significant reduction in their ability to 'monetise' their repertoire and sign and retain artists, which would ultimately harm consumers in terms of prices and choice, would also be addressed by the commitments.

V. CONCLUSION

(74) For the reasons mentioned above, the Decision concludes that the proposed concentration will not significantly impede effective competition in the internal market or in a substantial part of it.

(75) Consequently, the concentration should be declared compatible with the internal market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

NOTES

(1) OJ L 24, 29.1.2004, p. 1.

(2) Commission decision of 3 October 2007 in Case COMP/M.3333 - Sony/BMG; Commission decision of 15 September 2008 in Case COMP/M.5272 - Sony/Sony BMG.

(3) Commission decision of 3 October 2007 in Case COMP/M.3333 - Sony/BMG, recital 27.

(4) Commission decision of 3 October 2007 in Case COMP/M.3333 - Sony/BMG.

(5) OJ C 31, 5.2.2004, p. 5.

(6) OJ C 267, 22.10.2008, p. 1.