IMPALA slams EC Sony BMG approval
p2pnet news | Music:- What may be the last formal approval in making the Big 4 organised music cartel a done deal, with Sony BMG and Universal as the dominant partners, has been hammered home by the the European Commission.
The EC has sanctioned the merger of Sony and BMG to create Sony BMG, effectively driving the corporate stake deeper into the concept of an untrammelled independent international music market.
It’ll be left to the pundits speculate why Germany’s BMG, short for Bertelsmann Music Group, would still want to have anything to do with Japan’s Sony, given its many and various problems, but be that as it may, the two are now officially one, to the white-hot anger of IMPALA, representing independent music companies in Europe.
Says Neelie Kroes, European commissioner for competition policy:
As you may remember, the Commission’s first clearance decision – in 2004 – was annulled by the Court of First Instance last year. Today’s decision re-examines the case from top to bottom, looking not only at what we think likely to happen on the markets, but what has actually happened on the marketplace from 2004 to today.
We have conducted an extraordinarily detailed analysis, looking at millions of individual pieces of data, and building up as complete a picture as we possibly could as to the workings of these markets. We concluded that this merger was not a threat to competition, and have therefore cleared it without conditions.
In its investigation, the Commission looked in detail at the arguments raised by third parties, and the points made by the Court. It analysed all retail net prices, discounts and wholesale prices for all CD chart albums sold by all major record companies to all of their customers in the European Economic Area between 2002 and 2006. This was an enormous exercise. We found no evidence to support any theory of actual or likely anti-competitive effects of this merger.
In addition, we looked hard at the market for the licensing of recorded music in digital format, which was only beginning to develop at the time of the Commission’s 2004 investigation. This has now been fully analysed in the light of its development since 2004, and again we found no problems.
The Commission investigated all the various theories of price and non-price related coordination between major record companies provided by third parties and market observers. These theories included alleged coordination on budgets, on the pricing of each title, on pricing policy, on chart album prices, on access to retailers, on access to airplay, on chart rules, on release date, on coordination at the level of publishing activities. Again, we found no evidence of harmful effects.
This has been a long and very thorough investigation. I am confident in the conclusion reached: this merger poses no competition problems.
But Kroes’ view is by no means everyone’s.
‘EMI and Warner no longer have critical mass’
IMPALA, established in 2000 by help independent record companies and music publishers, has vehemently and consistently argued against the merger since it was first mooted, now attacking the EC for ignoring the “duopoly” with Sony BMG and Universal.
“The Commission waved the merger through unconditionally in 2004, creating the world’s second largest music company and putting 80% of the worldwide music market into the hands of four media conglomerates,” it said last year.
“This was despite widespread industry objection and previous market assessments that further concentration could not be tolerated. The independents highlighted a catalogue of fundamental mistakes which left the Court in no doubt that it had to overturn the Commission’s approval. The Court also ordered the Commission to pay three quarters of IMPALA’s costs.”
Now IMPALA is demanding a formal enquiry into the news that the EC has cleared the Sony BMG merger a second time.
“The independents take the view that this is indefensible,” it says, going on:
“The Commission has ignored major findings of the European court in favour of IMPALA last summer. The independents will ask the European Ombudsman to investigate potential maladministration. IMPALA will examine the decision in detail when the non-confidential version becomes available. As well as a formal enquiry, there is the option of appealing, and a clear case for claiming damages against the EC.
“IMPALA takes the view that the Commission has simply repeated its old mistakes. It ignored the independents’ evidence of anti-competitive behaviour across all key markets. Moreover, the Commission did not consider the non-price effects of the merger on consumer choice and diversity, as well as competitive access to retail, radio and online. No cultural diversity impact assessment was carried out, despite an EC Treaty obligation to do so.”
Sony BMG and Universal have more than 50% of the market and 70% of the Top 100 in many key EU territories (EC’s own market share analysis in UniBMG)., says IMPALA continuing:
Even the ‘mini majors’ EMI and Warner no longer have critical mass – they only have 10% and 14% respectively of the national Top 100s.
Their market share has plummeted in two years. As for the other competitors, no independent has even 1.5%. This is an effect which has clearly exacerbated competition in the last two years so we do not understand how the Commissioner can say she has found no problems. It does not make sense. Is this a competitive market? It is worse than energy.
The organisation also says the EC is sending contradictory messages to Europe’s citizens, artists and entrepreneurs, stating:
“It seeks remedies from Universal BMG, but not Sony BMG.
“It pushes an ‘Agenda for Culture’ to make sure culture and all creative industries are properly prioritised in other key policy areas, but what about competition? It signs the UNESCO Convention on Cultural Diversity with a fanfare, yet breaches its own Treaty obligations to take cultural diversity into account in all decisions.
“It acknowledges the vital role of SMES in all creative sectors yet takes decisions which restrict their market access.”
Background
Says IMPALA:
This is the Commission’s second review of the Sony/BMG merger. The EU’s first assessment was set aside last summer by the European Court. The court upheld an appeal by IMPALA of the approval of the merger in 2004 without remedies. This echoed the Commission’s finding in 2000 when it held that EMI/Warner should not be allowed without remedies – a stance which lead to the parties walking away from the merger.
In 2006 the European judges found that the Commission had ignored overwhelming evidence that competition would be severely damaged by SonyBMG and had made an unexplained u-turn when it walked away from the serious objections that it had previously highlighted. The court found that the recorded music market suffers from collective dominance and co-ordination, characterised by:
- alignment of prices, both gross and net,
- transparency of discounts and other terms, including campaign
- stable and relatively high level of pricing, considering significant fall in demand
- links between majors companies (eg jvs for compilations, distribution and licensing, industry association membership, joint copyright negotiations, merry-go-round of senior executives, vertical links)
- relative stability of market shares (ie if they were really competing we would expect to see real variations)
- homogeneity of product (even though content is heterogenous)
- existence of deterrents
The court also identified 8 points on price that make music very transparent and easy to co-ordinate prices and other competitive behaviour.
1. Public nature of PPDs
2. limited no of reference prices
3. limited no of albums that need to be monitored
4. publication of weekly charts
5. long-term stable relationships between retailers and majors
6. limited no of players on market
7. monitoring of the retail market
8. regular and permanent contact between majors’ sales forces and retailers and distributors
Earlier this year IMPALA called on the Commission and the majors to work together with the independents towards market recovery through broad and constructive remedies, such as those already agreed with Warner Music Group.
In May, the EC authorised the UniversalBMG Music Publishing merger on the basis of remedies, including divestments.
At the same time, all the European Heads of State called on the Commission to ensure that there is proper support for small operators in the creative sector. Last week in Lisbon, the Portuguese Presidency hosted the EU Cultural Forum, attended by the EU President Barroso and Culture Commissioner Jan Figel. The Forum again underlined the importance of the creative industries and the fundamental role of SMEs in promoting innovation. Market concentration was identified as a key issue for creative SMEs, along with under-capitalisation.
There are considerable market access barriers to entry and growth (increased costs of marketing and competing with the majors to sign artists; difficulty of getting into retail, on radio, tv, print media etc). An independent could never grow to become the size of a major. There have been no new independent market entrants. The Sony BMG merger has clearly made it harder for independents to promote new artists.
Article 151 (4) of the EC Treaty obliges the Commission to take cultural diversity into account in ALL decisions.
The EC is currently working on a ‘Agenda for Culture’ to make sure culture is properly mainstreamed into all key policy areas.
Stay tuned.
Also See:
European Commission – BMG joint venture Press conference, October 3, 2007
last year – Independenrs win landmark judgement, July 13, 2006
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October 7th, 2007 at 11:13 am
And anyone who has a web site should think about linking to Jon’s story here Hit Big Music Where It Hurts http://www.p2pnet.net/story/13570
I’m going to email him and ask him to break the list up. Someone said they were going to do that but I haven’t seen it yet.
October 7th, 2007 at 11:44 am
The indies should also help us in our campain to boycott these 4 packs of parasites and criminals Vivendi/Universal, Sony/BMG. EMI and Time/Warner whoi are corrupting our societies. They are becoming irrelevant but they are not harmeless.
We do the shoting they do the advertising until they become eradicated.