The EC said in a press release today (July 22) that it “has preliminary concerns that the transaction may allow UMG to reduce competition in the wholesale market for the distribution of recorded music in the European Economic Area (EEA) by acquiring commercially sensitive data of its rival record labels”.
The Commission said that it is “also preliminarily concerned that the transaction may allow UMG to reduce competition in the market for the supply of artist and label services in the EEA by removing an important competitive force”.
UMG’s Virgin Music Group revealed in December that it had agreed to buy Downtown Music Holdings LLC in a $775 million deal.
The EC announced in April that it was preparing to investigate the proposed acquisition.
Last month, after UMG formally notified it of the deal, the EC set a provisional deadline of July 22 to make a decision in an initial 25-day Phase 1 investigation.
Today’s news confirms a story published by Reuters last week that suggested the EC was preparing to launch a more extensive Phase II investigation lasting up to 90 working days.
The EC said today that it has until November 26, 2025, to make a decision, and that “the opening of an in-depth inquiry does not prejudge the outcome of the investigation”.
A UMG spokesperson issued the following statement to MBW today:
“Virgin Music Group today received notice from the European Commission that it will open a Phase II investigation into Virgin’s previously announced acquisition of Downtown Music Holdings.
“A Phase II review is a customary part of the Commission’s merger review process in those cases where initial concerns about a transaction’s effects have not been resolved during Phase I.”
“We remain confident that the combination of Virgin and Downtown will create an improved offering in the growing and highly competitive label services category that currently consists of roughly 100 companies.”
UMG
They added: “We remain confident that the combination of Virgin and Downtown will create an improved offering in the growing and highly competitive label services category that currently consists of roughly 100 companies, one that will provide a wide range of services to help independent artists, labels and entrepreneurs achieve their commercial and creative goals.
“We look forward to continuing to work constructively with the Commission to convey the benefits this transaction will bring to the independent community, as well as to address the wilful misrepresentation of market data by self-interested parties who represent a tiny fraction of the thousands of independent labels that make up the independent community globally.
“Our initial projected timeframe for the completion of the transaction remains unchanged.”
The European Commission describes a Phase II investigation as “an in-depth analysis of the merger’s effects on competition.” A Phase II investigation is opened “when the case cannot be resolved in Phase I”.
The EC explains on its website that “from the opening of a Phase II investigation, the Commission has 90 working days to make a final decision on the compatibility of the planned transaction with the EU Merger Regulation” and that “extensions of either 15 or 20 working days can be granted”.
If the EC does announce that it has decided to launch a Phase II investigation into the deal, that 90-day deadline means that it will have until around November 22 to make its decision unless a 15 or 20-day extension is granted.
According to European Commission statistics, “more than 90% of all cases are resolved in Phase I, generally without remedies,” which implies that less than 10% of cases proceed to Phase II.
At the conclusion, the Commission can either clear the merger (with or without conditions), or prohibit it entirely if competition concerns cannot be adequately addressed.
As previously reported by MBW, the UMG-Downtown deal did not meet the EU’s standard turnover thresholds that would typically require notification to Brussels, but it did trigger notification requirements in both the Netherlands and Austria based on their respective national thresholds.
The EC decided to look into the deal because the Netherlands triggered a legal mechanism in EU competition law called Article 22. Austria subsequently joined the referral.
In the statement published by the EC today, the Commission claimed that its “preliminary investigation indicates that the transaction may allow UMG to acquire upstream commercially sensitive data of its rival record labels” and that, “UMG would likely have the ability and incentive to use commercially sensitive data of third-party record labels for its own business activities notably related to recorded music”.
“Opening an in-depth investigation will allow us to assess more carefully whether this acquisition would have a negative impact on artists, labels and, ultimately, European consumers.”
Valdis Dombrovskis, European Comission
Commenting on the investigation, Valdis Dombrovskis, the EC’s Commissioner for Economy and Productivity; Implementation and Simplification, said: “By acquiring Downtown, UMG would purchase a large provider of services for labels that compete with UMG and for artists.
“Opening an in-depth investigation will allow us to assess more carefully whether this acquisition would have a negative impact on artists, labels and, ultimately, European consumers.”
As the investigation continues behind closed doors in Europe for an additional 90 days, the global music industry debate about the deal’s implications has been getting louder.
Earlier this month, Virgin Music Group’s bosses slammed what they called “juvenile and offensive falsehoods” spread by opponents of VMG’s planned Downtown acquisition.
A couple of weeks ago, over 200 people signed a letter objecting to UMG’s proposed takeover of Downtown, including 20 employees from Beggars Group and Secretly Group companies.
On July 2, the European Composer & Songwriter Alliance (ECSA) issued an open letter to the European Commission on Wednesday (July 2) urging it to block the planned acquisition.Music Business Worldwide
