EU Watchdog to Rule on Universal Music's Downtown Acquisition

Europe’s competition watchdog the European Commission (EC) has set a July 22 deadline to rule on whether Universal Music Group’s (UMG) proposed acquisition of Downtown Music should be investigated over antitrust concerns.

The background:

• In December, UMG’s Virgin Music Group revealed it had agreed to buy Downtown Music Holdings LLC in a $775 million deal.

• The acquisition would add Downtown’s portfolio of companies including FUGA, CD Baby and Curve Royalty Systems to UMG’s global operations.

• As per Music Business Worldwide, the EC opted to investigate the deal because the Netherlands “triggered a legal mechanism in EU competition law called Article 22.” Austria then joined the referral.

Opposing the acquisition:

• As per Digital Music News, the Independent Music Companies Association (IMPALA), which represents 6,000 independent music companies in Europe, has called for the EC to deny the merger.

• In April IMPALA Executive Chair Helen Smith released a statement: “A thriving music market needs effective competition and plenty of routes to market for labels and artists. UMG is planning the exact opposite because they want to control access to the market. The two other music majors, Sony and Warner, are also buying up music businesses in key markets. With far fewer options, many labels and artists are going to be shut out.”

• In an April editorial piece for Music Business Worldwide, Ruth Barlow, Chair of the UK’s Association of Independent Music (AIM) and Director of Live Licensing at the Beggars Group, wrote: “If regulators fail to intervene, UMG’s unchecked expansion will leave artists and independent labels with fewer options, less autonomy, and a market increasingly dictated by financial speculation rather than creative vision.”

UMG’s reply:

• In April UMG stated: “We look forward to continuing to co-operate with the European Commission in the weeks ahead. We are confident that we will close this acquisition in the second half of the year, on its original timeline.”

What’s next:

• Phase I of the EC’s investigation, in which it will conduct its initial review to determine whether the acquisition raises competition concerns, will wrap up on July 22.

• If it rules in the affirmative the EC will move to Phase II, the process of which can take up to 90 working days.

• According to EC statistics, less than 10% of cases proceed to Phase II, with 90% being resolved in Phase I “generally without remedies.”

• Once the investigation concludes, the EC can either approve the merger (with or without conditions) or prohibit it.