SONY BMG’s disastrous two-year run went from bad to worse yesterday, as the struggling business suddenly found itself at risk of being ordered to break up.

Rolf Schmidt-Holtz told employees in an e-mail that the court’s decision would “have no immediate effect on the day-to-day running” of the joint venture behind pop stars Kelly Clarkson and Britney Spears.

But Sony BMG now has its future in the balance, which is bound to hamper its operational effectiveness at a time when it is still trying to bed down its awkward 2004 merger.

Sony and Bertelsmann, the two parent companies, will almost certainly have to reapply to the European Commission, to get permission for a deal that they already thought had been agreed by Brussels.

Bertelsmann said it “discuss the appropriate next steps” with the EU, although the expectation is that that Brussels will probably hold a new inquiry rather than appeal against yesterday’s ruling from the Court of First Instance.

Mike Pullen, a competition lawyer at DLA Piper, said that “the Commission can only appeal to the European Court of Justice on a point of law, and it is unlikely that they would want to do that,” because the initial ruling is so detailed.

The most likely outcome is a full inquiry into the Sony BMG merger, although it is hard to believe that the Commission could force what would be an unprecedented break-up of a company that has been merged for two years, which has cut $300 million in annual costs, and operates in every major country outside Japan.

Sony BMG has been plagued by shareholder conflicts since its inception, with Bertelsmann complaining about the impact of the cost-cutting programme instituted by former chief executive Andrew Lack.

In the United States, Sony BMG’s album share was down 5.5 per cent at 26.25 per cent in the first half of this year.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts