EC to investigate Universal – BMG music publishing tie up

January 2007

Record labels

Perhaps unsurprisingly in light of the comments by the European Court of Justice when they annulled the European Commission’s approval of the Sony-BMG record label merger, the European Commission has extended its investigation into Universal’s $2.2bn (£1.12bn) acquisition of BMG’s music publishing business by up to 90 working days (to April 27th 2007). The combined Universal Music / BMG Music would have an appoximate 22% of the music publishing market. Both BMG and Universal Music currently have 11% market shares, behind EMI Music’s 20% share and Warner’s 15% share but ahread of and Sony Music (7%). The regulator wants more time to consider whether the deal will undermine competition. The inquiry could last up to five months. In a statement Universal said that “although we understand why, in the current environment, the European Commission has sought more time for its review, we believe, as we have always done, that the merger will be approved” adding that Universal were looking “forward to working with the Commission over the next few months to complete the process.  The original Sony-BMG ECJ review was due to a law suit from the European trade association IMPALA which represents independent labels and IMPALA has promised to battle the Universal takeover effort just as fiercely. IMPALA chairman and head of the Beggars Group, Martin Mills, said the issue for the Universal takeover was one of market access.  “One of our main concerns is the ability of the majors to leverage excessive market strength in recording and publishing as well as the crucial online market,” he said. “We have also asked the commission to implement the Sony-BMG judgment as a matter of urgency. These mergers are bad news for artists and music.”  The new investigation again casts doubts of where EMI might be going – recent gossip has been that private equity group  Permira were interested in the UK based major – but talk of a Warner-EMI merger/takeover is ongoing.

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