Tuesday 20 March 2012, 11:48 | By

IMPALA welcomes rumoured EC concerns over Universal’s EMI deal

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As the European Commission investigation into Universal’s bid to buy the EMI record companies heads into its second phase later this week, the indie label community issued another statement criticising the major’s expansion plans yesterday, and welcomed reports in the Financial Times last week that competition regulators at the EC have already privately expressed concerns about the takeover proposals.

As previously reported, Universal finally filed its bid proposals with EC competition regulators last month, after Citigroup announced its intent to sell the EMI labels to the world’s biggest music company last November. In theory EC regulators could have reached a decision about the sale within a month, but given the complexities of the deal it always seemed likely a longer second phase investigation would be required, and it’s thought that will be confirmed later this week.

Various parties have raised concerns about Universal’s bid, which will make the world’s biggest record company significantly bigger, but it’s thought so far the major has resisted the temptation to offer voluntary remedies to allay those concerns, still officially confident that a fuller second phase investigation will green light the deal in full. Nevertheless, the FT last week reported that “the European Commission this week privately expressed its serious doubts over the impact on competition from the purchase of EMI”.

Welcoming those reports, and still predicting the EC will reject this bid, the boss of pan-European indie labels trade body IMPALA, Helen Smith, told CMU yesterday: “Above all, the regulators will want to ensure more choice for artists and consumers, who also need to be protected from price increases. They will also be keen to ensure that online services can develop free from excessive constraints, to help the sector overcome piracy and allow citizens access to music on fair and reasonable terms. They will also want to make sure that in the future, independent artists like Adele and many others continue to flourish as they always did”.

Meanwhile the trade body’s Co-President, [PIAS] co-founder Michel Lambot, added: “Majors have always been a useful distribution system but most of the great performers and records have been the fruit of encounters between artists and entrepreneurs that were music lovers – Elvis Presley, The Jacksons, Bob Marley, U2, Edith Piaf, Jacques Brel, The Rolling Stones, Andrea Bocelli, Depeche Mode, Georg Solti, Adele have all been signed by the likes of Eddie Barclay, Richard Branson, Edward Lewis, Maurice Rosengarten, Chris Blackwell, Berry Gordy, Daniel Miller, Ladislao Sugar, Ahmed Ertegun, Martin Mills and numerous less well known people that have helped create an incredible diversity of the musical offer”.

He continued: “Most of these artists’ repertoire is now in the hands of a few music conglomerates. The danger now is an even bigger reduction of conduit – two majors controlling an excessive part of the music market will not allow new cultural entrepreneurs to exist anymore. If we want to keep the 21st century music alive and give artists a way to express themselves, then the regulators need to keep routes to the market open to the existing and future musical companies in order to keep a large choice to consumers, exciting new music and a healthy sector”.

It’s thought that a big chunk of phase two of the EC’s investigation into Universal’s EMI bid will focus on the digital landscape, where the record companies generally do not licence collectively (yet) and where the large catalogue owners can therefore make significant demands on start-up services who cannot afford to go live without the main two majors – Universal and Sony – on board.

Removing one of the smaller majors, ie EMI, from the market place will make that situation even worse, some argue. And the size of the two biggest players, and the demands they make on digital service providers, is already hindering growth in the wider digital music domain, or so says Charles Caldas from Merlin, which represents the bigger independents on digital matters, and who has written a conveniently timed opinion piece for GigaOM.

Of course Universal will argue that a few big players have become so dominant online in terms of consumer access – mainly Apple, Amazon and Google – that the power of the big content owners is curtailed in terms of distribution, access and price point. It’ll also point out that Universal has frequently led the way in licensing new and innovative digital business models (now is probably a great time to be entering into licensing talks with the major in fact, as they attempt to prove to the regulators this is so). Whether those arguments stack up at the European Commission – or indeed in the separate investigation taking place in the US – remains to be seen.

Meanwhile IMPALA’s statement yesterday also threw in two other points over which the trade body knows Universal and its owner Vivendi are sensitive, just for good measure presumably – the former’s record at adhering to past rulings by European competition regulator’s, and the latter’s precious credit rating. Said IMPALA: “Universal’s parent Vivendi had its credit rating recently put up for review due to the regulatory concerns raised by the proposed acquisition of its thriving competitor, EMI. And concerns were also raised about its past record regarding commitments in other competition cases”.

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