Commission Clears Universal’s Acquisition Of EMI’s Recorded Music Business, Subject To Conditions

The European Commission has approved under the EU Merger Regulation the proposed acquisition of EMI’s recorded music business by Universal Music Group. The approval is conditional upon the divestment of EMI’s Parlophone label and numerous other music assets on a worldwide level. The Commission had concerns that the transaction, as initially notified, would have allowed Universal to significantly worsen the licensing terms it offers to digital platforms that sell music to consumers. To meet these concerns, Universal offered substantial commitments. In light of these commitments, the Commission concluded that the transaction would not raise competition concerns anymore.
“Competition in the music business is crucial to preserve choice, cultural diversity and innovation. In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music. The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits.” said Commission Vice-President in charge of competition policy Joaquín Almunia.

The proposed merger would bring together two of the four so-called global “major” record companies, leaving only three majors. The Commission had concerns that following the merger, Universal would enjoy excessive market power vis-à-vis its direct customers, who sell physical and digital recorded music at retail level. In particular, the Commission focussed its investigation on the markets where record companies license their music to digital retailers such as Apple and Spotify. The Commission found that the proposed transaction, as initially notified, would have increased Universal’s size in a way that would likely have enabled it to impose higher prices and more onerous licensing terms on digital music providers. This could have negatively affected the possibilities for innovative providers to expand or launch new music offerings and would ultimately have reduced consumers’ choice for digital music, as well as cultural diversity in the European Economic Area (EEA).

Commitments

To remove the Commission’s concerns, Universal committed to divest significant assets.

These divestments include EMI Recording Limited, which holds the iconic Parlophone label (home to artists such as Coldplay, David Guetta, Lilly Allen, Tinie Tempah, Blur, Gorillaz, Kylie Minogue, Pink Floyd, Cliff Richard, David Bowie, Tina Turner and Duran Duran). The divestments also encompass EMI France (which holds the David Guetta catalogue), EMI’s classical music labels, Mute (home to The Ramones and Jethro Tull), Chrysalis (home to Depeche Mode, Moby and Nick Cave & The Bad Seeds), various other labels and a large number of local EMI entities. The divestment package also includes Coop, a label licensing business selling artists such as Mumford and Sons, Garbage and Two Door Cinema Club.

In addition, Universal committed to selling EMI’s 50% stake in the popular Now! That’s What I Call Music compilation JV and to continue licensing its repertoire for that compilation in the next ten years.

Universal finally committed not to include Most Favoured Nation (”MFN”) clauses in its favour in any new or renegotiated contract with digital customers in the EEA for ten years. MFN clauses oblige digital customers to extend any favourable term granted to Universal’s competitors to Universal. This commitment will allow Universal’s competitors to negotiate more freely with digital customers and further levels the playing field between these competitors and Universal.

The rights to be divested are worldwide and cover both digital and physical music. This will ensure a viable and competitive exploitation of the divested artists and catalogue by the purchaser of the assets.

In light of these commitments, the Commission concluded that competition on the digital music markets in the EEA will be adequately preserved and that the transaction will have no negative impact on consumers.

Source: Universal Records