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EU widens AOL-TWX probe
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June 19, 2000: 12:07 p.m. ET
AOL's $124B Time Warner acquisition attracts in-depth EU review
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LONDON (CNNfn) - The European Commission announced a four-month antitrust investigation into Internet group America Online Inc.'s planned $124 billion acquisition of media giant Time Warner Inc. on Monday.
Based in Brussels, the commission - the executive arm of the European Union - decided to extend an existing month-long antitrust inquiry into the two U.S. companies, despite possible competition remedies submitted by the two.
"The main competition issue raised by the merger is the vertical integration of Time Warner content with AOL online services," according to a statement from the commission, adding it feared the new company "will be able to dictate the technical standards for delivering music over the Internet."
The European watchdog will also examine whether AOL could leverage its dominance of the United States - the commission says it has 40 percent of the Internet market - to achieve dominance in Europe. The commission found the remedies already offered by AOL and Time Warner were not enough to safeguard competition, at least without further inspection.
European regulators last week decided to carry out a full investigation into the proposed $20 billion combination of EMI Group PLC (EMI) and Time Warner's music business, fearing the deal might reduce competition in the market for recorded music and music over the Internet.
Wilko Van Weeld, a competition lawyer and partner at Brussels-based law firm Stanbrook & Hooper, told CNNfn.com, "The one deal has implications on the other."
 In delivering its decision to extend the investigation into EMI's tie-up with Time Warner (TWX: Research, Estimates), the regulator said the new company might dominate the digital delivery of music via the Internet. Lawyers said the Commission specifically referred to Time Warner's pending merger with Internet company AOL (AOL: Research, Estimates). Time Warner is the parent company of CNNfn.com.
After a transaction is announced, the commission has a month to decide whether it warrants further investigation, taking on board the views of parties such as competitors and trade and consumer associations.
The deal has even greater implications in the U.S. AOL boasts about 23 million subscribers through its AOL and Compuserve Internet services, and a combination with Time Warner would give it access to 13 million cable subscribers.
Walt Disney Co. (DIS: Research, Estimates). has said it believes the deal, which would create the world's largest media and internet company, would create an entity that could control the content offered through cable networks. A dispute between Time Warner and Disney's ABC television network last month prompted Time to cut off access to ABC for 3.5 million cable subscribers in New York, Los Angeles and nine other cities.
 AOL last week was forced into submitting proposals to allow open access to its Instant Messenger system, after a federal antitrust inquiry in the U.S. AOL blocked messages from consumers using other software.
The commission has the right to veto deals or impose conditions such as the sale of various units before allowing a merger to proceed. In recent months, the commission has stepped up its investigations into WorldCom Inc.'s (WCOM: Research, Estimates) acquisition of Sprint Corp. (FON: Research, Estimates). and Microsoft Corp.'s (MSFT: Research, Estimates) stake in Britain's cable operator Telewest Communications PLC (TWT). Microsoft's new suite of software, Office 2000, is also the subject of an ongoing European investigation.
In early Monday trading on the New York Stock Exchange, shares of AOL fell 13/16 to at 53-11/16, while Time Warner stock slid 1-3/8 to 79-1/4. 
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