The EC mentioned in a press launch right now (July 22) that it “has preliminary issues that the transaction might enable UMG to scale back competitors within the wholesale marketplace for the distribution of recorded music within the European Financial Space (EEA) by buying commercially delicate information of its rival report labels”.
The Fee mentioned that it’s “additionally preliminarily involved that the transaction might enable UMG to scale back competitors out there for the availability of artist and label providers within the EEA by eradicating an necessary aggressive power”.
UMG’s Virgin Music Group revealed in December that it had agreed to purchase Downtown Music Holdings LLC in a $775 million deal.
The EC introduced in April that it was making ready to examine the proposed acquisition.
Final month, after UMG formally notified it of the deal, the EC set a provisional deadline of July 22 to decide in an preliminary 25-day Section 1 investigation.
At this time’s information confirms a narrative revealed by Reuters final week that steered the EC was making ready to launch a extra intensive Section II investigation lasting as much as 90 working days.
The EC mentioned right now that it has till November 26, 2025, to decide, and that “the opening of an in-depth inquiry doesn’t prejudge the result of the investigation”.
A UMG spokesperson issued the next assertion to MBW right now:
“Virgin Music Group right now obtained discover from the European Fee that it’ll open a Section II investigation into Virgin’s beforehand introduced acquisition of Downtown Music Holdings.
“A Section II evaluate is a customary a part of the Fee’s merger evaluate course of in these circumstances the place preliminary issues a few transaction’s results haven’t been resolved throughout Section I.”
“We stay assured that the mixture of Virgin and Downtown will create an improved providing within the rising and extremely aggressive label providers class that at the moment consists of roughly 100 corporations.”
UMG
They added: “We stay assured that the mixture of Virgin and Downtown will create an improved providing within the rising and extremely aggressive label providers class that at the moment consists of roughly 100 corporations, one that may present a variety of providers to assist unbiased artists, labels and entrepreneurs obtain their industrial and inventive objectives.
“We stay up for persevering with to work constructively with the Fee to convey the advantages this transaction will deliver to the unbiased group, in addition to to handle the wilful misrepresentation of market information by self-interested events who signify a tiny fraction of the hundreds of unbiased labels that make up the unbiased group globally.
“Our preliminary projected timeframe for the completion of the transaction stays unchanged.”
The European Fee describes a Section II investigation as “an in-depth evaluation of the merger’s results on competitors.” A Section II investigation is opened “when the case can’t be resolved in Section I”.
The EC explains on its web site that “from the opening of a Section II investigation, the Fee has 90 working days to make a closing resolution on the compatibility of the deliberate transaction with the EU Merger Regulation” and that “extensions of both 15 or 20 working days will be granted”.
If the EC does announce that it has determined to launch a Section II investigation into the deal, that 90-day deadline means that it’ll have till round November 22 to make its resolution until a 15 or 20-day extension is granted.
In line with European Fee statistics, “greater than 90% of all circumstances are resolved in Section I, typically with out cures,” which suggests that lower than 10% of circumstances proceed to Section II.
On the conclusion, the Fee can both clear the merger (with or with out circumstances), or prohibit it fully if competitors issues can’t be adequately addressed.
As beforehand reported by MBW, the UMG-Downtown deal didn’t meet the EU’s commonplace turnover thresholds that might usually require notification to Brussels, but it surely did set off notification necessities in each the Netherlands and Austria based mostly on their respective nationwide thresholds.
The EC determined to look into the deal as a result of the Netherlands triggered a authorized mechanism in EU competitors regulation referred to as Article 22. Austria subsequently joined the referral.
Within the assertion revealed by the EC right now, the Fee claimed that its “preliminary investigation signifies that the transaction might enable UMG to accumulate upstream commercially delicate information of its rival report labels” and that, “UMG would possible have the flexibility and incentive to make use of commercially delicate information of third-party report labels for its personal enterprise actions notably associated to recorded music”.
“Opening an in-depth investigation will enable us to evaluate extra fastidiously whether or not this acquisition would have a unfavorable impression on artists, labels and, in the end, European customers.”
Valdis Dombrovskis, European Comission
Commenting on the investigation, Valdis Dombrovskis, the EC’s Commissioner for Economic system and Productiveness; Implementation and Simplification, mentioned: “By buying Downtown, UMG would buy a big supplier of providers for labels that compete with UMG and for artists.
“Opening an in-depth investigation will enable us to evaluate extra fastidiously whether or not this acquisition would have a unfavorable impression on artists, labels and, in the end, European customers.”
Because the investigation continues behind closed doorways in Europe for an extra 90 days, the worldwide music trade debate concerning the deal’s implications has been getting louder.
Earlier this month, Virgin Music Group’s bosses slammed what they referred to as “juvenile and offensive falsehoods” unfold by opponents of VMG’s deliberate Downtown acquisition.
A few weeks in the past, over 200 individuals signed a letter objecting to UMG’s proposed takeover of Downtown, together with 20 staff from Beggars Group and Secretly Group corporations.
On July 2, the European Composer & Songwriter Alliance (ECSA) issued an open letter to the European Fee on Wednesday (July 2) urging it to dam the deliberate acquisition.Music Enterprise Worldwide
