Europe approves AOL / Time Warner deal

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The European Commission has given the green light to Time Warner’s $165 billion merger with America Online. After four months of scrutiny, the commission focused its demands almost entirely on preventing the merged company from dominating online music distribution.

Competition officials, however, played down some of the biggest concerns raised in the United States. In Europe, they said, the combined company would not be able to dominate online distribution of movies, services like instant messaging or access to the high-speed broadband networks of the future.

Those issues are central to deliberations at the US Federal Trade Commission in Washington, where both regulators and rivals warn that the merged company would own one of the country’s biggest cable television networks as well as be the biggest provider of online services.

Under the deal with European regulators, the two companies also promised to keep AOL’s networks open to music produced by rivals.

The European decision became much easier last week, after Time Warner reluctantly agreed to abandon a separate $20 billion alliance between its Warner Music subsidiary and the EMI Group in Britain. Mario Monti, the European Commission’s top antitrust official, had insisted that such an alliance would have reduced the number of major music distributors to four from five.

The European Commission said the Time Warner / America Online merger would create the first Internet provider capable of distributing its own brand of music and entertainment over its own distribution network.

The commission rejected arguments by rivals which warned that the combined company could dominate access to broadband networks as well as the online distribution of movies and television entertainment.

The commission said those fears about access to broadband Internet access were unfounded because neither of the companies owns a network of that kind in Europe. And in contrast to its fears about the competition in online music, the commission said Time Warner’s position in video entertainment “cannot be regarded as dominant in Europe.”

Commission officials also brushed aside worries about America Online’s dominance in instant messaging services, which allow customers to find each other online and flash messages to each other. America Online’s so-called Buddy System is one of the service’s biggest attractions for many customers, and rivals argue that it tends to dissuade them from jumping to rival services.

Here, too, however, European officials concluded that the company had a far less dominant position in Europe than in the United States.

In a brief statement, America Online and Time Warner said they were pleased by the decision and were still proceeding in discussions with the US Federal Trade Commission.

European Commission

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