EU Court to rule on Sony-BMG merger once again

mobile_accessories_microphone_sxc_DinosG.jpg

A long-standing legal battle around the merger between the music giants Sony and Bertelsmann (BMG) has been revived as independent labels lodged a second appeal with the European Court of Justice in the hope of blocking the deal.

The Independent Music Publishers and Labels Association (IMPALA) has decided to challenge the Commission’s decision to re-approve the creation of the world’s second biggest group in the music industry after Universal Music. The association is appealing the “unconditional authorisation” Brussels gave to the merger.

Indeed, the Commission imposed no sanctions on the new giant in exchange for giving its renewed approval, with Brussels underlining that the effects of the merger on the market had been thoroughly analysed without revealing significant risks for competitors.

However, in a document adopted in March, IMPALA demanded that the EU revise its competition rules to better “recognise the specificities of culture and the crucial role of economic diversity in music”. Independent labels are also concerned that the increased concentration in the online market, where they see higher barriers to entry for smaller companies.

Currently, more than two thirds of market sales in the music industry are controlled by the ‘four Majors’ (Universal, Sony BMG, EMI and Warner Music), while the remaining third is in the hands of independent companies. 

IMPALA argues that thousands of small music labels across the world produce more than 80% of the global releases, but reach less than 5-10% of the public. “Over 95% of what most people hear and see, whether on radio, retail or the internet, is concentrated in the hands of four multinationals,” reads the group’s press release.

The Court of Justice has now been asked to study the subject a second time. In the first ruling, back in 2006, the Court of First Instance had underlined the risks of a “collective dominant position after the concentration” brought by the Sony BMG merger, and regretted that the Commission did not present exhaustive observations on this issue.

Horst Weidenmueller, CEO of the independent label !K7 Records and co-president of IMPALA, said: "A merger such as this with no remedies has repercussions for thousands of artists and small businesses across Europe. IMPALA's primary issue is the dysfunctioning of the music market. Online is the key example here and the EC should look more closely at how the majors are controlling the roll-out of this market."

But Competition Commissioner Neelie Kroes, giving her renewed go-ahead to the merger, made clear: "This has been a long and very thorough investigation. I am confident in the conclusion reached. This merger poses no competition problems."

Patrick Zelnik, another co-president of IMPALA and president of the Naïve label, added: "The European Commission has simply repeated the economic, political and cultural errors it made before. These need to be corrected.  The implications for cultural diversity are clear for us all to see.  It is time for the regulators to work together with the majors and the independents on far-reaching remedies, in the interests of market recovery."

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

However, following a complaint filed by the Independent Music Publishers and Labels Association (Impala), the Court of First Instance - an independent court attached to the European Court of Justice - overturned the Commission's 2004 clearance on 13 July 2006 (see EURACTIV 14/07/06).

But in October 2007 the Commission again gave its green light to the merger without imposing any remedy as Impala had rquested (see EURACTIV 03/10/07).

Subscribe to our newsletters

Subscribe