EU hurdle to AOL, Time Warner merger

The European Commission has launched a detailed inquiry into the planned merger of US internet and media giants AOL and Time Warner.

The commission said it would investigate the effects of the deal on the emerging market of distributing music on the internet.

The two firms had offered a number of unspecified concessions to address competition concerns, but this was apparently not enough to avert a four-month in-depth investigation.

As a result of the merger with Time Warner, AOL will have preferential access to the leading source of music publishing rights and music repertoire in most member states.

European Commission

The commission said it was worried about the "vertical integration of Time Warner content with AOL online services", arguing that the internet firm would have "preferential access to the leading source of music publishing rights and music repertoire in most [EU] member states".

The European Commission now has until mid-October to approve or block the merger.

Only a few days ago, the commission had opened an extended probe into the planned merger of Warner Music with UK rival EMI.

Warner Music is a subsidiary of Time Warner.

The commission said this merger would lead to an oligopoly of four firms dominating the recorded music market in Western Europe.

The EU's competition watchdog warned already then that it would look closely at digital delivery of music via the internet, warning that "Time Warner/EMI could become dominant in the digital delivery of music via the internet, especially considering the merger between AOL and Time Warner".

The mother of all mergers

A plunge of AOL's stock market fortunes has taken some of the shine off the Time Warner deal, but it still stands as one of the biggest mergers in history.

When the deal was announced, the two firms had a combined stock market value of $350bn. As the EU launched its investigaton, this had shrunk to just over $222bn.

And even though the deal is technically a merger, it is in effect a takeover of 'old-media' firm Time Warner by 'new media' star America Online.

AOL is the world's biggest internet service provider, while Time Warner is strong on the content side, with interests spanning from television news service CNN and Warner Bros. film studios to magazines like Time, People and Sports Illustrated.