The Senate subcommittee for antitrust heard from Universal and EMI executives about their proposed merger. Lucian Grainge (Universal), Roger Faxon (EMI), and Irving L. Azoff (Live Nation) argued that the nature of the music business placed constraints upon Universal’s ability to raise prices after the deal. Although Universal’s market share would grow to 40 percent after the EMI acquisition, the music industry relies on the quality of its pop hits, not just its market power.
Opponents, such as independent labels and rival Warner Music, countered that Universal would nevertheless be able to control licensing terms, especially for Internet services, giving it “the power to squeeze out the competition.” The proposed transaction reduces the number of major record labels from four to three, thereby resulting in a highly concentrated market. The American Antitrust Institute submitted written testimony to the subcommittee, noting the merger’s potential effect on new entry and innovation:
The mere perception that a single dominant firm, or three firms with market power consciously acting in parallel, can leverage access to an essential input inevitably would dissuade rational investors from innovating in platform and business models.
Full content: New York Times
Related content: A Presentation on Assessment of Market Power and Dominance
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