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The EU Commission Approves Apple's Acquisition of Beats

10. News
With the deadline of July thirtieth quickly approaching, the European Commission, under EU Merger Regulation, has finally cleared Apple's acquisition of Beats Electronics and Beats Music.


The EU Commission's posted an official press release stating that Beats Electronics was established in 2008 and designs, develops and sells audio products such as headphones and audio speakers. Beats Music was spun out of Beats Electronics in 2013 and offers a music streaming service in the United States and Australia, allowing consumers to receive ("stream") music on their mobile device or computer against a monthly or yearly fee. Beats Electronics and Apple both sell headphones in the European Economic Area (EEA).


The Commission concluded that the combination of the two businesses did not raise competition concerns because the combined market share of Apple and Beats Electronics is low. In addition, Apple and Beats Electronics are not close competitors because the headphones they sell differ markedly in functionality and design. Moreover, even after the transaction, a large number of global competitors such as Bose, Sennheiser and Sony would remain.


The Commission also examined the transaction's likely effects on the distribution of digital music to consumers. Both Apple and Beats Music are active in this field. Apple offers a music downloading service through iTunes and Beats Music offers a music streaming service, although it is currently not available in the EEA.


The Commission concluded that Apple faces several competitors in the EEA such as Spotify and Deezer, making it implausible that the acquisition of a smaller streaming service that is not active in the EEA would lead to anticompetitive effects.


The Commission also concluded that the transaction would not give Apple the ability and incentive to shut out competing streaming services from access to iOS, Apple's operating system for mobile devices. It based this conclusion, amongst others, on the fact that Apple was already active in the distribution of digital music before the merger. Hence, the merger would not change Apple's ability or incentive to block access to its iOS.


Bose, one of Apple's global competitors noted by the EU Commission has wasted no time in suing Beats over headphone cancellation patents last Friday. Whether Bose's  lawsuit will end the relationship held with Apple is unknown at this time.


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