Mergers of Majors: Applying the Failing Firm Doctrine in the Recorded Music Industry

Abstract

Throngs of individuals, companies, and government regulatory agencies around the world adamantly contend that sizeable consolidations of intellectual property within the media and technology fields – including the recorded music industry – violate principal notions of antitrust law and fair competition.

However, the U.S. failing firm doctrine and the European Union’s concept of the rescue merger are powerful yet narrowly tailored defenses against antitrust scrutiny, and merging companies undergoing such steep opposition would be wise to consider invoking these common law doctrines. Despite the volatile nature of technological ventures and their significant propensity for failure, no parties to an acquisition of intellectual property have yet to seek protection under the failing firm doctrine. Although most scrutinized mergers involving intellectual property would not meet the lofty standards of these defenses, an in-depth analysis of the failing firm doctrine, its E.U. counterpart, and one recent merger of international record companies that endured serious divestment requirements from the Federal Trade Commission and European Commission suggests that opportunities to employ the doctrines exist and are simply overlooked or dismissed. As competitors acquire technological companies that are down on their luck, they should take advantage of the failing firm doctrine and the protections that it affords.

Keywords: failing firm doctrine, rescue merger, mergers and acquisitions, antitrust law, bankruptcy law, intellectual property, music, recorded music industry