The independent sector has welcomed the news that the European Commission has launched a more in-depth phase two investigation into Universal Music’s acquisition of Downtown Music Holdings. That follows an initial analysis of the deal by European Union competition regulators that began last month.
According to Helen Smith, Executive Chair of pan-European indie label trade group IMPALA, the decision to launch the more in-depth investigation “confirms the gravity of this case”. While “all sectors need strong big companies as leaders” and “all businesses deserve good options if the founders want to exit”, she says, there is nevertheless “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.”
Gee Davy, CEO of the UK’s Association Of Independent Music, has also welcomed the EC’s decision to open a phase two investigation, as well as calling on the UK’s Competition & Markets Authority to take an interest in the Downtown developments.
“This isn’t just about one deal”, she says, “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 Competition & Markets Authority in the UK, to follow the EC’s lead to ensure a balanced and competitive music market”.
The European Commission issued a statement yesterday confirming that, based on its initial analysis, there are “preliminary concerns” that Universal acquiring Downtown – and with it the FUGA, CD Baby, Songtrust and Curve businesses that provide services to millions of independent artists and labels – may reduce competition in the music distribution and artist/label services strands of the music industry within the European Economic Area.
Additionally, there are data concerns. The EC’s statement notes that “Downtown processes commercially sensitive data of third-party record labels” and that, once it’s part of Universal, the major “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”.
That access to data, it adds, “may harm rival record labels and may ultimately have the effect of further strengthening” Universal which, of course, is “already the leader in the market for the wholesale distribution of recorded music in the EEA”.
With its phase two investigation, the EC will need to decide whether those concerns justify intervention, which could ultimately result in the Downtown deal being blocked, or force Universal to agree to remedies that could allay the concerns. That might include selling off parts of the Downtown group.
The indie sector has been very critical of Universal’s bid to buy Downtown, which is part of a recent acquisition spree by the mega-major that has also included the purchase of indies like [PIAS] and 8Ball.
In its statement welcoming the phase two investigation, IMPALA reiterates that the Downtown 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’s statement also alludes to some of the recent push back to its campaign against the Downtown deal, mainly from Universal’s allies, including [PIAS] founder Kenny Gates and the bosses of Virgin Music, Universal’s existing distribution and services division, itself the result of various past acquisitions.
In doing so, IMPALA says it recognises the important role played by the big companies in the music industry, especially when it comes to standing up to big tech. And that the founders of any independent music businesses need to have an exit strategy, which may involve selling their companies to a bigger player.
The statement reads, “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”. However, with this deal, the concern remains that “there is a point at which big becomes too big”.
