The Commission said it had "opened an in-depth investigation" into the deal because of the concerns that Universal could become too dominant in the sector if it goes through as currently proposed.
"The Commission’s initial investigation showed, in particular, that the proposed transaction would lead to high combined market shares in the wholesale of physical and digital recorded music in the EEA (European Economic Area) and in numerous Member States and that, post merger, Universal would enjoy increased market power vis-à-vis its direct customers," the Commission said in a statement.
"At this stage of the investigation, the new entity, which would be almost twice the size of the next largest player in the EEA, would not appear to be sufficiently constrained by the remaining competitors on the market, by its customers' buyer power, and/or by the threat of illegal music consumption (so-called 'piracy'). The Commission will now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not," it said.
Joaquín Almunia, the EU's Competition Commissioner, said any reduction in competition would be detrimental to consumers. "The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions," he said.
Major merger or takeover deals involving companies with big market share are generally ruled on by the European Commission using its Merger Regulation. Under the terms of the Regulation, the Commission is obliged to prevent deals that could "significantly impede effective competition in the common market or in a substantial part of it" from going through.
The Commission has until 8 August to determine whether the deal can go ahead.