[JURIST] The European Court of First Instance [official website], the European Union's second-highest court, on Thursday rejected a proposed merger between Sony and Bertelsmann AG (BMG) [corporate websites] that earned unconditional approval [EC report] in July 2004 from European Commission (EC) [official website] regulators. The decision marks the first time that EU judges have turned back a Commission merger approval. Independent music trade association Impala [advocacy website] brought the legal challenge against the proposed merger, arguing that regulators did not support their findings that Europe's music industry was not operated as a monopoly either before or after the Sony BMG merger. Regulators found that evidence of promotional discounts before and after the deal suggested that the music industry was not inflating prices, but in the opinion [PDF text; summary PDF], the court found that regulators should have investigated claims of retaliatory measures in the industry more thoroughly, and that the commission's investigation overall was too cursory to withstand scrutiny.

Sony and BMG can appeal the decision within two months to the EU Court of Justice [official website]. Otherwise, they must resubmit their antitrust clearance applications to the EC within seven days, to be evaluated by the EC given current market conditions. The Washington Post has more.