Independent music companies ask EC to investigate EMI divestment processes by Sony and Universal
As Sony and Universal advance with selling off assets as part of the EC's approval for the acquisition by the two market leaders of their former rival EMI, European independents confirmed today that they have asked the EC to intervene.
The trade body IMPALA has asked decision makers in Brussels to make sure the outcome promotes competition and does not strengthen the duopoly that exists between Universal and Sony.
The news comes as reports circulate this week that Sony and BMG, who are already understood to share a close working relationship, made a joint bid for Parlophone and other Universal/EMI assets. BMG was Sony's choice of buyer for the publishing catalogues Virgin and Famous, with the deal announced on the same day as BMG was declared the buyer of Mute Records from Universal.
These facts are expected to raise alarm bells with the European regulator, who is responsible for reviewing the sale processes and deciding whether these deals meet strict criteria set by the EC to ensure the divestments have the desired effect. Any irregularities could turn the procedure into a full blown investigation.
Universal and Sony were allowed to buy EMI on the basis that the divestments they make would compensate for the reduction in competition in an adequate way. Strict rules apply to make sure this happens. First, the purchaser must have no connections to the seller. Second, the seller must not benefit from the divestments or re-acquire any market influence over the assets. Third, the divestment must not raise any competition concerns (which rules out any Sony involvement in bids). Any breach of these conditions or other irregularity, or any result which protects the position of Sony or Universal, whether co-ordinated or otherwise, is forbidden and would be blocked by the EC.
Helen Smith, Executive Chair of Impala said: "Our position from the start has been that music must not be allowed to become a "two horse race" and making sure the independents are able to compete effectively is crucial. All interested companies should be treated equally as bidders for any assets to be sold off. Properly strengthening the independents should be part of the outcome. The divestment processes must not be conducted in a way that simply comforts the market leaders' view of how competition should, or should not, develop."
IMPALA was established in April 2000 to represent independent music companies. 99% of Europe’s music companies are SMEs. Known as the “independents”, they are world leaders in terms of innovation and discovering new music and artists - they produce more than 80% of all new releases. SME’s also produce 80% of Europe’s jobs. Their potential is enormous but is hampered by complex barriers to trade and severe market access problems. The impact on diversity, consumer choice and pluralism is clear. Over 95% of what most people hear and see, whether on radio, retail or the internet, is concentrated in the hands of four multinationals, known as the majors.
Cultural and creative SMEs are now officially recognised by the EU as “the drivers of growth, job creation and innovation”. IMPALA expects the EC and its member countries to put in place key investment, digital and market access measures. Fostering Europe's economy of culture and diversity is one of the EU's top priorities in becoming the world's leading knowledge economy. Culture is a bigger earner than any of chemicals, automobiles or ICT manufacturing and provides more than 3% of Europe's jobs. IMPALA has its own award schemes to help promote cultural diversity and new talent and highlight the artistic contribution of independent music. IMPALA award winning artists include Efterklang, Adele, Manu Chao, Radiohead, Agnes Obel, Caro Emerald and Sigur Ros.