MUMBAI: In what has come as a shock to the global music industry, The Court of First Instance of the European Communities annulled a decision made by the European Commission a couple of years ago.

That decision had given the nod to the merger of Japan's Sony and Germany's Bertelsmann. The ruling marks the first time that the courts have overturned a commission decision to clear a deal. It could affect other acquisitions in the music space. Warner and EMI are belieevd to be talking to merge.

Media reports indicate that Sony BMG which is the world's second largest music company has to return to the European Commission within a week to seek new approval. The EC will decide in a month's time whether to approve the merger while considering current market conditions. The 2004 decision was annulled on the argument that regulators did not show whether a monopolistic situation would be created in the event of the merger or that there wasn't one at the time of the merger.

In a statement Bertelsmann said, "Today's judgment does not affect the validity of the Sony BMG joint venture, which has been up and running since August 2004." If the EC does not aprove the merger things will get tricky.

A suit had been filed by Impala, the Independent Music Publishers and Labels Association, in December 2004 due to concern over dominance of the market by firms like Sony BMG, a newly created joint venture.