EU Could Separate Sony BMG. Markets Punish WMG & EMI.

The European Commission said today that it could break apart the music units of Sony and BMG after it reevaluates their merger. The commission cleared the merger in 2004, but a European court today overruled the commission and ordered them to take another look.  The suit had been brought by Impala, a trade group of European independent labels.

The commission has two months to appeal the court’s decision.  Sony and BMG have just seven days to resubmit antitrust documents.

THE MARKETS – Stocks of EMI and the Warner Music Group, who have also been considering some kind of a hook-up, fell sharply. As of Noon EST Thursday, WMG stock was off 13.8% (at times it was down 19%) on the NYSE and EMI as down 9.35% in London. Bertlesmann is a private company.

REACTION – While the outcome is far from certain, the decision can’t help but slow further mergers and acquisitions by large entertainment companies.  EMI Chairman Eric Nicoli said, "This judgment is about how the Commission undertook its assessment of the Sony BMG case in 2004 and the particular evidence presented in that case. It will require detailed study before any wider conclusions can be reached."

More reading: Motely Fool, The Street, HITS