European Commission gives AOL-Time Warner merger go-ahead

The European Commission said Wednesday it has given its conditional approval to the merger of America Online Inc. with Time Warner Inc., after a four month in-depth probe into the deal.

The commission approved the deal after AOL agreed to sever all structural links with German media group Bertelsmann AG.

“The proposed undertakings will prevent AOL from having access to Europe’s leading source of music publishing rights, thereby eliminating the risk of dominance in the emerging market for online delivery of music over the Internet and software-based music players,” the European Commission said in a statement.

Despite heavy lobbying by Walt Disney Co., the commission said that the merger does not raise concerns with respect to the European Internet broadband access market. The commission’s concerns focused solely on the music industry.

“In a music market already characterized by a high degree of consolidation the danger, which has been averted, was that by allowing AOL to team up effectively with three of the five music majors, the resulting company could have dominated the online music distribution market and the market for music players,” said European Commissioner for Competition Mario Monti.

He explained that AOL would have had links with Bertelsmann’s music unit BMG, and with Warner Music and EMI. The other two majors he referred to are Universal and Sony Music.

The commission said AOL and Bertelsmann have put in place a mechanism by which Bertelsmann will progressively exit from AOL Europe GmbH, in which it holds a 50 per cent stake. Bertelsmann will also pull out of AOL Compuserve France, its joint venture with AOL and Vivendi SA subsidiaries C