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Impala welcomes European Commission’s decision to open detailed investigation into UMGs acquisition of Downtown, urges full scrutiny and blocking of deal



 

IMPALA, the European association of independent music companies representing over 6,000 independent music companies and associations, welcomes the European Commission’s decision to open a detailed investigation (phase two) into the proposed merger between Universal Music Group (UMG) and Downtown Music Holdings. 

The European Commission confirmed it will now carry out an in-depth investigation into the effects of the transaction on competition, as part of its duty "to prevent concentrations that would significantly impede effective competition in the EEA or a substantial part of it." An in-depth investigation will allow the EC to "assess more carefully whether this acquisition would have a negative impact on artists, labels and, ultimately, European consumers", as stated by Commissioner Valdis Dombrovskis, Commissioner for Economy and Productivity; Implementation and Simplification.

The UMG/Downtown deal is the latest in a series of acquisitions and poses serious competition threats that are incompatible with the functioning of the internal market. The acquisition would further entrench UMG’s position across European music markets, squeezing out competition, narrowing opportunities for independents and the artists they work with and allowing UMG to exercise more control over streaming services. 

IMPALA has consistently said that all sectors need strong, big companies as leaders and has specifically supported UMG taking a strong stance on issues such as TikTok. It’s equally important that all independent businesses have good options if their founders want to exit. The debate should also focus on recognising their contribution to the sector as with PIAS and 8Ball. Our concern is simply that there is a point at which big becomes too big.

Earlier this month, an open letter saw over 200 hundred founders and business leaders across the independent music industry publicly confirm their opposition, an unprecedent number in specific merger cases. They urged the EC to conduct a detailed investigation. Concerns have also been raised right across the music sector, from authors and composers, to managersfeatured artists and independent publishers

In June, Professor Amelia Fletcher, former Chief Economist of the UK competition authority, as well as renowned artist and independent music label co-founder, sent an open letter  also urging the EC to go to an in-depth investigation. Fletcher noted that the acquisition represents “another step in UMG’s broader strategy of undermining the vitality and viability of the independent music sector” and that it is “vital that this anti-competitive process is stopped”.

Concerns about the impact of consolidation were also raised in a new report Combating the Emergence of a Two-Tier Music Streaming Market, by industry experts Dan Fowler and Katherine Basset who were commissioned by IMPALA to assess the streaming economy in the context of IMPALA’s streaming recommendations. The authors identified “…a widening gulf between large rightsholders and independent actors, driven by market consolidation, opaque platform policies, and emerging monetisation practices that increasingly favour scale over diversity”.

IMPALA is committed to ensuring a fair and competitive market where balance is essential and believes this acquisition must be stopped outright in order to avoid one company leveraging its market power to shape the music ecosystem to its advantage.

Helen Smith, IMPALA Executive Chair commented: “The European Commission’s decision confirms the gravity of this case. All sectors need strong big companies as leaders, and all businesses deserve good options if the founders want to exit. However, there is a point when big is too big for the ecosystem. Our view is that the EC is right to dig deeper, and we believe blocking this deal is the only way to safeguard competition and diversity.”

Dario Draštata, Chair of IMPALA, President of regional association RUNDA Adria and Executive Director of Dallas Records added: “This is a positive sign that the risks posed by market consolidation in the music sector are being understood. Independent players across Europe have already felt the impact of UMG’s growing power, with other acquisitions such as PIAS in October. Further national acquisitions in key markets have already been executed even this year and more are in the pipeline. Blocking this deal would be a powerful step in the right direction.”

Francesca Trainini, IMPALA President and Vice President of Italian association PMI added: “This investigation is a crucial moment for the future of Europe’s music landscape. The Commission’s intervention shows these concerns are being taken seriously. The risks of reinforcing the leader and losing a big competitor are clearer today than ever before. Remedies would be ineffective in today’s music market. We trust the Commission will take the necessary steps to protect competition, access, and diversity across the sector.” 

Martin Mills, founder of Beggars Group continued: “Universal’s power, reach and influence has been very visible in the last few weeks, even as they have sought to deny it. The EC is right to feel the need to look further into where this could end up.”

Gee Davy, CEO of the UK’s Association of Independent Music concluded: “The Commission’s move to open a detailed investigation addresses the concerns of many across the industry: that unchecked consolidation poses a systemic threat to the future of an open music sector with plenty of choice for consumers and artists. This isn’t just about one deal, it’s about stemming a tide that will stifle diversity and limit opportunities. This is a global issue with consequences in many local markets, and we look to other regulators, including the CMA in the UK, to follow the EC’s lead to ensure a balanced and competitive music market.”

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