EU delays review of Microsoft-Time Warner buy

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[b]EU delays review of Microsoft-Time Warner buy[/b]
[i]The European Commission has stopped the clock on its review of Microsoft and Time Warner's proposed purchase of U.S. antipiracy software maker ContentGuard, a spokesman for the EU executive body said Tuesday.[/i]

The proposed transaction changed radically on Nov. 22, when French technology company Thomson joined software giant Microsoft and Time Warner in the deal.

But that change has not yet been notified formally to the Commission, which is continuing to review the old version of the deal, which it found troubling.

At this point, the Commission is seeking information only from Microsoft and Time Warner, even though the companies have announced that the deal has changed.

The effect of the addition of Thomson will not be clear until the Commission knows how the new deal is structured.

"In the absence of full details of the deal with Thomson announced on Nov. 22, the Commission cannot comment if it would be notifiable," spokesman Jonathan Todd said.

Two companies must notify the Commission if they jointly buy a third company because either of the buyers would be in a position to block a decision.

But if three companies each buy one-third of another firm, Commission doctrine says that no individual owner has the ability to veto and the deal need not be notified.

The Commission, which had to act by Jan. 6 or give the deal automatic clearance, had set Tuesday for the two parties to offer remedies for the problems it had identified and Dec. 22 for final Commission action.

Bethesda, Md.-based ContentGuard is one of the world's key patent holders of software that protects digital media, including music, films and documents.

Such digital rights management (DRM) software allows media companies to protect their programing from unlicensed copying and allows them to earn money on their film and music libraries over the Internet.

The three companies have said ContentGuard will let media companies easily move music and film from one computer system to the next.

Apple Computer, Microsoft and Sony have all established proprietary systems that cap the freedom of consumers to a limited range of music players.

Time Warner, the world's largest media company, has made it part of its mission to use the Internet to market its vast library of media, including Bugs Bunny, America Online, CNN and People magazine. DRM is an essential part of this equation.

For Microsoft, DRM software will become an important component in its bid to compete in the digital music arena and to transform the personal computer into a hub for all digital entertainment in the living room.

Thomson, for its part, is in the process of transforming itself from a low-margin consumer electronics company into a high-margin provider of services to media companies and film studios.

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