The fate of America Online's £80bn merger with media group Time Warner was last night uncertain after it emerged that the European commission will block the deal unless the putative partners are ready to make concessions.

The EC is reported to have arrived at a negative decision which the European competition regulator's office will enforce unless the pair make fresh undertakings before September 24.

Brussels fears that a deal such as that proposed by AOL-Time Warner would create a company with a near-stranglehold on the delivery of entertainment over the net.

The EC warned the companies last month that the deal "would create a dominant position in the markets for online music delivery, music software, internet dial-up access, broadband net access and integrated broadband content."

That, it said, would "significantly impede" competition.

AOL has already offered to formally sever links with one of its joint-venture partners, German media group Bertelesmann, in an attempt to appease the EC. It has also promised not to exploit its position in the US to expand into Europe for a period of three years after the merger.

The EC's competition chief, Mario Monti, is thought to want the two firms to offer rivals access to their enormous content library and to their proprietary technology for downloading music. The EC yesterday played down the idea that it would block the deal and declined to confirm whether it had already drawn up a negative decision.

The EC is also known to have concerns about a related deal - the tie-up between EMI Music and Warner Music.

EMI said yesterday it had submitted a "balanced set of remedies" in an effort to calm fears that the merged entity would be too dominant but declined to provide details.

There is speculation that the groups have offered to sell some record labels; one source said they had offered to dispose of interests in Spain, France and Denmark, along with other publishing interests.