EU court: Rehear Sony BMG case

The European Union's highest court ruled Thursday that a lower court made several mistakes when it overturned regulatory approval for Sony Corp. and Bertelsmann AG to combine their music units to form the world's second-largest record label.

This prolongs a twisted legal saga over the legality of the 2004 merger after independent music companies complained that the EU's antitrust authority was wrong to allow the number of major record labels shrink from five to four.

The European Court of Justice on Thursday set aside a 2006 ruling from the Court of First Instance that largely backed the independents, telling the lower court to re-examine the case again.

The Court of First Instance ruling overturning the European Commission's approval for the deal forced regulators to examine it again to prove that it would not create or strengthen a dominant position in the music markets of Europe.

The European Commission cleared the deal a second time in November.

But Sony BMG appealed the 2006 ruling to an even higher court, the European Court of Justice, which said Thursday that judges had made "errors of law" in the 2006 ruling.

The ECJ said it could not rule itself on the dispute but it told the Court of First Instance to examine it again, saying it was wrong to set such a high bar for regulators when they were trying to see how the deal would affect the market.

It said the lower court was mistaken in the legal test it set for how companies could be shown to have a collective monopoly in a market by a "tacit" coordination of music sales and prices.

The creation of Sony BMG pulled artists like Shakira, George Michael, Avril Lavigne and Elvis Presley under one roof and joined up labels such as Arista, Jive, Epic and Columbia.

Impala, which represents 2,500 independent music labels, is also appealing the second approval for the deal, saying it allowed too much power concentrate in the hands of Sony BMG and its rivals Vivendi SA's Universal Music Group, EMI Group PLC and Warner Music Group PLC.

BMG was a branch of Germany's Bertelsmann AG, an international media group with interests in broadcasting, book and magazine publishing. It joined with the Japanese electronics and entertainment giant Sony in 2004, saying they needed to combine forces to deal with declining CD sales and the threat of declining record sales as illegal Internet downloads surged.