European Commission launches formal investigation into UMG’s $775M Downtown deal
Image credits: Reuters
Following official notification from UMG, the European Commission can commence its investigation into the Downtown deal.
EC kicks off investigation into UMG’s Downtown takeover
The European Commission (EC) has officially opened a formal investigation into Universal Music Group’s (UMG) $775 million acquisition of Downtown Music.
The move comes eight weeks after the EC announced it would take action. However, the investigation required UMG to formally notify the EC of the transaction before it could trigger proceedings. This marks a landmark step in regulatory scrutiny over one of the biggest music mergers.
Why the EC is getting involved
Despite not reaching the “turnover thresholds” set out under the EU’s Merger Regulation, the investigation centres around concerns that “the transaction threatens to significantly affect competition in certain markets of the music value chain”.
UMG’s Virgin Music Group is set to gain major assets like FUGA, a major B2B music distributor, and CD Baby, a digital distribution service. This move could give UMG a tighter grip on global distribution, including platforms that independent artists and labels rely on.
What happens now?
Right now, the EC is conducting an initial Phase I investigation. This review lasts 25 working days, with a provisional decision deadline set for July 22. From there, the EC can approve the deal (with or without conditions), or decide if it raises serious competition concerns.
If serious competition concerns arise, the EC could escalate to a Phase II probe. This includes a deeper dive, lasting up to 90 working days. Again, the EC could decide whether to clear the merger or to block the deal outright if competition concerns cannot be resolved.
The bigger picture
Indies have been calling to block the deal for months. Industry body IMPALA has been vocal in its opposition, warning the deal could hurt competition and access to distribution services.
Back in February, IMPALA called for investigators to intervene, arguing that giving UMG this level of dominance “would not be tolerated in any other market”.
IMPALA’s Executive Chair Helen Smith welcomed the investigation:
“We have been keen to see the assessment get started, so this is great news. There is only one outcome to prevent harm and that is for the EC to block this outright, to secure balance, harmony and diversity in the ecosystem.”
UMG isn’t backing down
Still, UMG remains confident about the deal’s prospects.
The major label said back in April:
“We look forward to continuing to co-operate with the European Commission in the weeks ahead. We are confident that we will close this acquisition in the second half of the year, on its original timeline.”
For now, the clock is ticking. All eyes are now on July 22, when the Commission will reveal whether the deal can progress. Until then, artists, distributors, and indie labels will be watching closely.