The AOL-Time/Warner Merger.

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Touro University International

Kevin P. Beck  

BUS 401 - International Business

Module 1 Case Assignment: The AOL-Time/Warner Merger

Professor - Dr. Paul Watkins

American and European governmental agencies voiced serious concerns when AOL and Time/Warner announced their intentions to join forces and form the largest corporate alliance the business world had ever experienced.  Due to the broad implications of such a merger, the plan was closely scrutinized and several hurdles were encountered on the path to approval.  This paper will examine online music distribution as the most important issue considered in the European approval process.  It will also explain the key difference in how the Europeans assessed their issues compared to the Americans.  Let’s begin by exploring what the Europeans deemed to be the most critical aspect of this monumental partnership.  

 

When details of the planned merger were announced, the European Commission began to examine the implications.  In fact, in the early stages the commission issued a 45-page statement outlining a series of concerns that were initially very similar to the issues raised in the United States.  Some of the document's most contentious points included music software, Internet dial-up access, broadband Internet access and integrated broadband content.  However, the Europeans' fears about the pending partnership's potential to dominate the online delivery of music prevailed as the single most important obstacle to the deal's success.  According to an article on The Wall Street Journal Online, this was mainly because the combined companies also intended to acquire EMI Group PLC, which is the world's largest music publisher and third largest recording company.   Furthermore, since the commission strongly believed the ability to access digital music online would be a nearly irresistible draw to new users, they understandably did not want that particular field monopolized.  But how would the European Commission and America's FTC set about effectively tackling the issues they felt were most important concerning this corporate first?  

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Because America and Europe differed on what they believed to be the key sticking points of the merger, they assessed it from somewhat different angles.   In Europe, AOL did not have sufficient pre-existing infrastructure to monopolize Internet access.  This allowed the commission to center it's demands on successfully getting AOL to sever it's existing links with German music giant Bertelsmann AG.  To further appease commissioners, Time/Warner called off it's planned joint venture with British rival EMI Group PLC.   According to Mario Monti, one of the 20 commissioners who approved the merger, "In a music market already characterized ...

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