Sony Corporation of America and SONY BMG Music Entertainment Win Landmark Appeal Before European Court of Justice Relating to the SONY BMG Joint Venture

On July 10, 2008, the European Court of Justice set aside the judgment of the Court of First Instance concerning the formation of the SONY BMG recorded music joint venture. In 2006, the Court of First Instance had annulled the European Commission’s 2004 decision to clear the formation of SONY BMG, following an appeal by Impala, a group representing independent record companies.

In its judgment of July 10, 2008, the European Court of Justice found that in annulling the 2004 clearance decision the Court of First Instance had committed a number of errors of law. In particular, the Court of First Instance erred by (i) relying on the Commission’s statement of objections for the purpose of its judicial review; (ii) applying an excessive standard to evidence submitted by the merging parties; (iii) taking into account non-disclosed confidential documents submitted by complainants; and (iv) applying an inappropriate standard of reasoning.

The judgment of the European Court of Justice is a landmark decision that clarifies several important legal questions relating to the standards that should be applied in the judicial review of merger clearance decisions. As such, it represents a significant precedent for future merger cases.

The Court of First Instance will now have to reassess Impala’s appeal in the light of the judgment of the European Court of Justice. Following the Court of First Instance’s 2006 ruling, the merging parties renotified their merger and, in October 2007, the European Commission confirmed its clearance under EU merger control in a second decision. An appeal against that second decision is currently also pending before the Court of First Instance.

Cleary Gottlieb represented Sony Corporation of America and SONY BMG Music Entertainment.