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Last Updated: Thursday, 22 September 2005, 15:26 GMT 16:26 UK
Sony-BMG merger in EU challenge
Elvis Presley
Since the merger, singles by BMG's Elvis Presley have been re-released
A European Commission decision to allow the merger of record giants Sony and Bertelsmann (BMG) is being challenged by independent music companies.

The case, before a one-day hearing at the European Court of First Instance, contests the merger of two of the world's five biggest record companies.

The commission made legal errors by allowing the move, says the Independent Music Companies Association (Impala).

But the EU reportedly backed the merger as there was no case against it.

It had initially objected to the consolidation, but it was approved without conditions in July.

The EU said initial concerns that the deal could lead to higher CD prices and fewer customer choices were unfounded.

Consumer shift

The deal created the world's second largest record label, behind Universal Music, and has meant 80% of the world's music is now owned by four record companies.

But Sony-BMG, which is based in New York, has argued it is good for the industry which has faced difficult trading conditions and a shift in how music is bought by consumers.

The companies first announced their tie-up plans in November 2003, saying the deal would be a merger of equals.

It brought together Sony stars such as Barbara Streisand and Beyonce and BMG stars, including Elvis Presley and Christina Aguilera.

The problem lies where the playing field is not level due to severe market access problems
Alison Wenham, Impala

Impala, which represents 2,500 indie labels, is arguing the commission underestimated the impact the merger would have on online markets and failed to take an overview of an industry already dominated by recording giants.

It said it wanted the EU to "do its job as the guardian of real competition, consumer value and choice and cultural diversity and more importantly citizenship rights and obligations".

A court decision is expected in three to six months.

Alison Wenham, Impala vice-president said: "Creatively the independents have the edge.

"They know they can compete if they have the same chance as the big companies.

"The problem lies where the playing field is not level due to severe market access problems created by over-concentration in a cultural industry."

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