Court casts shadow over Sony-BMG deal: majors or indies likely to challenge results of EC probe.(News)

The European Court of First Instance (CFI) is casting a long shadow over the Sony-BMG union and future music business combinations, which could include a renewed merger bid by EMI and Warner.

European indies organisation Impala last week threatened to take the EC to the CFI if competition commissioner Marie Monti gives unqualified clearance to the merger.

Meanwhile, sources close to the EC probe believe that Monti's office may feel that evidence backing its objections to the merger is not strong enough. A belief that the CFI would overturn his objections to the Sony-BMG deal is believed by many to have prompted Monti to give BMG executives a "clear signal" the merger would be allowed.

Monti met the music executives just over a week ago, only two days after oral hearings into the proposed deal had ended and just as the so-called "devil's advocate panel" had started stress-testing its evidence against Sony-BMG. Nevertheless insiders say that even at this early stage--a decision is not due until July 22--the EC may have been anxious that its evidence would not stand up to tough scrutiny if Sony and BMG challenged its findings in the CFI.

"Monti may have lots of facts and figures, but he cannot prove there is collusion on pricing," says one source. He adds, "It is even more difficult to prove more nebulous things such as anti-competitive disadvantages or a lack of diversity."

Monti's office was embarrassed in June 2002 when the CFI annulled his 1999 decision to block a merger between Airtours and First Choice. The CFI ruled that the EC had failed to prove the merger would have adverse effects on competition. The insider says, "Monti may have come to the conclusion that the evidence [against Sony and BMG] just ...