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EC Just Says No To AOL-Time Warner Merger

The European Commission plans to strike down the merger hopes of America Online Inc., and Time Warner, Inc., sources close to the talks said Monday.

The EC, as reported by the online version of the European Wall Street Journal, is circulating a preliminary proposal to block the merger, but isn't going to rule out a merger outright until it publishes its final results later this year.

Scott Miller, Time Warner spokesperson, said this is a normal part of the merger process with the EU.

"We are totally comfortable with where we are at this stage of the negotiations," Miller said. "We have made excellent progress and are confident that the talks will conclude successfully. As we have said before, we are on track to close the merger in the fall."

Regulators on both sides of the Atlantic Ocean have concerns with the merger between the world's largest Internet service provider and one of the world's largest entertainment companies, saying the deal could stifle competition.

Officials from both companies scoff at the idea, saying the merged company would enhance competition, not stifle it.

Steve Case, AOL chairman and chief executive officer, in a hearing before the Federal Communications Commission July 27, said the merger would create the next evolutionary step in Internet development.

"What this merger will mean for our companies and consumers is that, together, AOL and Time Warner will build a company that will take the Internet to the next level," Case said. "Our commitment to consumer choice and competition will help lead our industry forward to a second Internet revolution reaching as many people as possible as quickly as possible. The merger will drive Internet development through competition, offer the greatest variety for consumer choice, and build a truly global Internet community."

This flies in the face of actions taken by AOL and Time Warner earlier this year, which have done nothing to allay regulator concerns.

AOL has taken a decidedly un-cooperative stance in the Instant Messaging arena. Attempts by the Internet Engineering Task Force to create a standard IM platform will likely stall, as AOL refuses to open its code to scrutiny by other companies to create interoperability standards.

Time Warner hasn't done the best job when it comes to reducing tensions, either.

Earlier this year, the company blocked broadcast of ABC-TV over its network for 48 hours because of a contract dispute with ABC owner Disney Co. Time Warner also prohibited competing local and regional Internet service providers from advertising in areas that would compete with its Road Runner cable Internet service.



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