European Commission Opens In-Depth Investigation into UMG's Downtown Acquisition

The European Commission (EC) has opened an in-depth investigation into the proposed acquisition of Downtown by Universal Music Group (UMG).

Backstory:

• In December UMG’s Virgin Music Group announced it had agreed to buy Downtown Music Holdings LLC for $775 million.

• In June the EC announced it would investigate the potential acquisition as part of a 25-day Phase I investigation.

• It has now progressed to Phase II, “an in-depth analysis of the merger’s effects on competition.”

• That could last up to 90 days, with the EC’s decision due by November 26, 2025.

• The EC can then either clear the merger (with or without conditions) or prohibit it.

• The proposed acquisition has been the subject of heated debate, with more than 200 reps from independent music companies signing an open letter in opposition, and Virgin bosses staunchly denying any anticompetitive accusations.

The EC’s statement:

• In its announcement, the EC flagged “preliminary concerns” that “the transaction may allow UMG to acquire upstream commercially sensitive data of its rival record labels.”

• It also highlighted that “Downtown processes commercially sensitive data of third-party record labels,” and that after the acquisition “UMG would likely have the ability and incentive to use commercially sensitive data of third-party record labels for its own business activities notably related to recorded music.”

• It added: “UMG's access to such data may harm rival record labels and may ultimately have the effect of further strengthening UMG, that already is the leader in the market for the wholesale distribution of recorded music in the EEA.”

• It noted that the “transaction may remove Downtown as an important competitive force in the market for A&L services.”

UMG’s statement:

• (As per Music Business Worldwide): “We remain confident that the combination of Virgin and Downtown will create an improved offering in the growing and highly competitive label services category that currently consists of roughly 100 companies, one that will provide a wide range of services to help independent artists, labels and entrepreneurs achieve their commercial and creative goals.”

• They add: “We look forward to continuing to work constructively with the Commission to convey the benefits this transaction will bring to the independent community, as well as to address the wilful misrepresentation of market data by self-interested parties who represent a tiny fraction of the thousands of independent labels that make up the independent community globally.”

• The comment concludes by stating UMG’s timeline for completing the transaction remains unchanged.