Commission again clears music giants’ merger

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The European Commission has cleared, for a second time and without imposing any ‘remedies’, the joint venture between music companies Sony and BMG, which had been set aside by the European Court of Justice in 2006.

The Court of First Instance criticised, among others, the following points:

Collective dominant position after the concentration: The Court criticised the Commission, claiming that it had “carried out an extremely cursory examination” in this regard and had presented “only a few superficial and formal observations on that point”. 

Promotional discounts: The Commission argued that those have the effect of reducing the transparency of the market to the point of preventing the existence of a collective dominant position. The Court criticised this, however, saying this theory was not supported by sufficient arguments and data. 

Retaliatory measures: The Court found that the Commission had too easily relied upon the lack of evidence that such measures, for example “sanctioning a deviating record company by excluding it from compilations” had been used in the past. It added: “In addition, even if the appropriate test in that regard were to consist of determining whether retaliatory measures had been exercised in the past, the Commission’s examination was inadequate. At the hearing it was not in a position to indicate the slightest step which it had completed or undertaken for that purpose.”

In January 2007, the music corporations re-notified the Commission of the merger. Competition Commissioner Neelie Kroes says that the notification was followed by an in-depth investigation

Positions

Addressing Journalists in Brussels on 3 October 2007, Competition Commissioner Neelie Kroes said: "In its investigation, the Commission looked in detail at the arguments raised by third parties, and the points made by the Court. It analysed all retail net prices, discounts and wholesale prices for all CD chart albums sold by all major record companies to all of their customers in the European Economic Area between 2002 and 2006." 

Independent record companies, among others, had made the point that anti-competitive behaviour on the music market works in more subtle ways. Kroes added, however: "We looked hard at the market for the licensing of recorded music in digital format. The Commission investigated all the various theories of price and non-price-related coordination between major record companies provided by third parties and market observers. These theories included alleged coordination on budgets, on the pricing of each title, on pricing policy, on chart album prices, on access to retailers, on access to airplay, on chart rules, on release date, on coordination at the level of publishing activities."

The competition commissioner concluded: "This has been a long and very thorough investigation. I am confident in the conclusion reached: this merger poses no competition problems."

Impala President Patrick Zelnik said, however: "The EC has ignored the simple fact that four companies control 95% of the music most citizens hear on the radio throughout the world. What kind of a message does this send to European citizens? That the EU's prioritisation of cultural diversity, creative SMEs and pluralism is purely rhetoric?"  

Background

A 19 July 2004 Commission decision cleared the way for the creation of Sony BMG Music Entertainment , a joint venture of Sony and BMG Music Publishing, which immediately became the world's second-largest music industry group. 

Following a complaint filed by the Independent Music Publishers and Labels Association (Impala), the Court of First Instance of the European Court of Justice overturned, on 13 July 2006, the Commission's 2004 clearance. 

Timeline

Impala announced that, after examining the non-confidential version of the Commission decision, which was not yet available at the time of writing, it will take steps against the Commission, including:

  • an appeal to the European Ombudsman to investigate possible maladministration, 
  • an appeal before the European Court of Justice, and;
  • demanding damages from the European Commission. 

Further Reading

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