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AOL, Time put offer to EU
September 22, 2000: 3:41 p.m. ET

Merger partners yield concessions to win European Commission approval
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LONDON (CNNfn) - America Online Inc. and Time Warner Inc. have offered a series of concessions hoping to appease European Union antitrust concerns about their proposed $121.8 billion merger, an EU spokeswoman confirmed Friday.

The European Commission was reviewing their proposal, which was submitted Thursday, the spokeswoman said.

The concessions come the same week EMI Group proposed a "balanced set of remedies" to European Union antitrust officials to try and salvage the U.K. music company's planned $20 billion joint venture with Time Warner's Warner Music Group.

Though separate deals, the EU, the executive arm of 15-nation European Commission, has hinted that the future of the two unions are intertwined. The commission is concerned the EMI/Time Warner venture will hurt competition by reducing the number of global music publishers from five to four, and fears the AOL/Time Warner deal could create a dominant distributor of music via the Internet if Time Warner brings EMI (EMI) into its fold.

Time Warner spokesman Scott Miller declined to comment on the AOL/Time Warner concessions, but said the regulatory review process remains "on track."

Four concessions

But Reuters, quoting an industry source, said the companies submitted a one-and-a-half page paper proposing four steps designed to remove concerns that the combined entity would dominate the distribution of entertainment over the Internet.

Included among those provisions, Reuters said, was asking Germany's Bertelsmann AG to "progressively exit" from its 50/50 ownership stake in AOL Europe, reducing any possible link between the Warner/EMI venture and Bertelsmann's BMG, another one of the music industry's major concerns.

AOL also agreed to take similar steps to reduce any conflicts of interests related to AOL France, jointly controlled by AOL and France's Vivendi, Reuters said.

The news agency reported Time Warner has also agreed not to discriminate against non-AOL affiliated Internet service providers for at least five years after their merger is complete. Finally, EMI and Warner music agreed to make their music compatible with at least three software music players not owned or controlled by either of the companies for at least five years.

graphicHowever, the Washington Post reported Friday that the proposal does not explicitly forbid AOL from excluding unaffiliated content from its proprietary online service, nor does it prevent AOL from giving third-party content less favorable treatment on its service.

A ruling is expected from the European Commission no later than Oct. 24. The Federal Communications Commission, which along with the Federal Trade Commission is conducting the U.S. antitrust review of the AOL/Time Warner union, is also expected to complete its review within a month.

U.S. regulators are expected to impose conditions that would require AOL (AOL: Research, Estimates), the world's biggest Internet service provider, and entertainment conglomerate Time Warner (TWX: Research, Estimates) to offer access to rival Internet services through Time's high-speed cable lines.

The FCC also is considering conditions that would open up AOL's Internet instant-message services and interactive-television systems.

CNNfn learned Thursday that the FTC has asked at least one company opposed to the AOL/Time Warner merger to submit sworn testimony related to the deal, a sign the federal agency may be compiling data for a lawsuit to block the merger.

AOL shares fell 94 cents to $54.44 in late afternoon trading Friday while Time Warner lost 75 cents to $78.50. Back to top


FTC preparing to block AOL/Time Warner? - Sept. 21, 2000

AOL-Time Warner at risk? - Sept. 18, 2000

EMI ready to bend to appease EU on Time Warner deal - Sept. 15, 2000


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