European Union Approves AOL-Time Warner Deal

October 11 -- BRUSSELS, BELGIUM (Reuters) — Internet giant America Online Inc. won European approval today for its $129 billion takeover of Time Warner Inc. after agreeing to sever all links with Germany's Bertelsmann AG.

The European Commission said the companies' concessions and last week's withdrawal of the planned music joint venture of Warner Music and EMI Group had reassured it that the new group would not be able to dominate the emerging market for online music.

Bertelsmann is owner of BMG music, one of the world's five "major" record labels, along with EMI, Warner Music, Seagram's Universal Music, and Sony Music.

Because of its links with Bertelsmann, AOL-Time Warner would have had preferred access to Bertelsmann's music library, giving it control over the leading source of music publishing rights in Europe, the commission said.

"In a music market already characterized by a high degree of consolidation, the danger, which has been averted, was that, by allowing AOL to team up effectively with three of the five music majors, the resulting integrated company could have dominated the online music distribution market and music players," EU Competition Commissioner Mario Monti said in a statement.

Under the agreement, Bertelsmann will progressively withdraw from the AOL Europe joint venture and will also pull out of the French joint venture AOL CompuServe, in which Vivendi subsidiaries Cegetel and Canal Plus are also involved.

The Commission is due to rule on the rival merger of Vivendi with Canada's Seagram on Friday and is expected to take a close look at the remaining link between Vivendi and AOL in France.

Monti's spokeswoman, Amelia Torres, said that AOL and Time Warner had offered to resolve the problems caused by their link to Bertelsmann during the commission's initial one-month probe of the deal.

But she said that guarantees given at the time were insufficient to satisfy the commission, particularly given the obvious links with the planned EMI/Warner Music venture.