from Reuters this morning; hot off the press

LUXEMBOURG, July 13 (Reuters) - A European court on Thursday annuled European Commission approval of a 2004 merger between Sony Music and BMG, which allowed the music industry to shrink from five major companies to four.

The case, brought by independent record companies, has been closely watched by EMI (EMI.L: Quote, Profile, Research) and Warner Music (WMG.N: Quote, Profile, Research) for any signs of how Europe's top antitrust authority will react to a possible merger between the two.

"The Commission did not demonstrate to the requisite legal standard either the non-existence of a collective dominant position before the concentration or the absence of a risk that such a position would be created as a result of the concentration," the Court of First Instance said in a statement.


The Commission said it would have to re-examine the merger.

"We will review the ruling. But if a merger decision is annulled, the European Commission must re-examine the case," a Commission spokesman said.

The Commission can appeal against the ruling.

Impala, a trade group for independent record companies, appealed against the Sony BMG deal in November 2004, and has spoken out against any combination of EMI and Warner, the world's third- and fourth-largest music companies respectively.

The Commission cleared the joint venture between Japanese electronics giant Sony Corp. (6758.T: Quote, Profile, Research) and German media group Bertelsmann AG [BERT.UL] in 2004, overcoming its suspicions of tacit price collusion among the major music companies.

But it said at the time it would keep a close eye on the industry "as it becomes even more concentrated and would very carefully scrutinise any further major concentration in the industry".

Warner Music and EMI have each offered about $4.6 billion to buy the other, with both bids rejected.

SONY.

IF Stringer is serious about synergy, this is his big opportunity to buy Bertelsmann out very cheap.

Despite their official party line, Bertelsmann wanted out of Sony BMG, even before todays decision. They were (more or less) secretly negotiating with Sony about reducing their share of Sony BMG to 25%.

And what about the BMG-Music-Publshing-Auction? Who wants to pay a top price after today?

Nobody. So again, Sony will be the most likely buyer.

Even if the EU will force them (in 3 to 5 years) to sell some parts, this is SONY big chance to become a force in the music industry.