Time Warner and EMI said today (October 5) that they have called off their planned $20bn merger because they have not been able to meet the concerns of the European Commission's competition regulators.

The two companies said were are pulling their application for regulatory approval, but will press on with talks and hope eventually to present new merger plans.

"The withdrawal of our application allows additional time to reassess regulators' concerns and to pursue solutions simultaneously in Europe and the US," EMI chairman Eric Nicoli said in a statement.

Time Warner said that it would go away and try to present a new deal that unites "two of the most creative and complementary organisations in the worldwide music industry [and] that will make sense for the two companies and be acceptable to the Commission."

Although the Commission's resistance to the deal had been well documented, it came as some surprise to see the companies give up ahead of another meeting with the EC which had been scheduled for later today. It seems designed to smooth the passage of the larger ($130bn) merger between America Online (AOL) and Time Warner, which is also currently being considered by the European regulators.

The EC last month drafted a document recommending that the deal be blocked. But it said that this was a normal part of its proceedings and that it had not ruled definitively. Its objections centred on Warner-EMI's dominance of the music publishing business and the combined entity's ability to dominate the emerging online market for music.

The two companies offered a wide range of concessions, notably offering to sell EMI's Virgin Records and part of the Warner Chappell publishing company, as well as promising not to withdraw from collection societies that independently gather royalties for artists.

The EC is expected to rule on the AOL-Time Warner and the parallel Vivendi-Canal Plus-Seagram merger within the next three weeks.