Brussels, 27/11/2006 (Agence Europe) - As part of its investigation into the Universal-BMG merger, the Commission consulted the Independent Music Companies Association (IMPALA) on the likely impact of this transaction. On 22 November, IMPALA submitted its report to the Commission, expressing its members' unanimous opinion that such a consolidation would seriously impede competition in the music publishing sector. The Commission will reach a conclusion before 8 December, but recent decisions would suggest it will not give its approval.
On 6 September, Vivendi and Universal Music Group (Universal), a wholly owned subsidiary of Vivendi, signed a firm agreement with Bertelsmann to acquire BMG Music Publishing (BMG), Bertelmann's music publishing wing, for €1.63 billion in enterprise value. The proposal has already been approved by US competition authorities, but has still to be endorsed by European authorities.
IMPALA's members include publishing and record companies - possible competitors and customers of the new entity. Helen Smith, IMPLALA Deputy Secretary General, said that they were all of the opinion that “the market can't tolerate any more concentration”. Effectively, she said “the combination of Universal and BMG would allow them to control how the market works … and to do deals to the exclusion of the smaller independents”.
There has been great concentration in the music publishing market over the last ten years, with 80% of securities in the hands of the five largest conglomerates, known as “majors”. Concentrating this limited competition, whether through the merger of two of the majors, would mean a 20% reduction in the number of majors (from 5 to 4 entities).
That was a key argument used by IMPALA in July 2006 against the creation of the joint enterprise between Sony and BMG. After Commission approval of this consolidation, IMPALA took the matter to the European Court of First Instance, which ruled against the Commission.
Given this, it would not be surprising if the Commission were to be more cautious in its assessment of the Universal-BMG case, particularly in the light of the similarities with the previous case. The prior consultation of IMPALA is in itself an indication of its stance and Ms Smith is optimistic as to the outcome of the affair. “I can't really see the Commission has much choice,” she said. The Commission decision will be given on 8 December at the latest. Refusal would mean a more in-depth investigation, lasting five months, would have to be opened. (cd)