IMPALA expects sale of EMI to Universal to be blocked outright

Following the announcement by Vivendi of the purchase of EMI recording by Universal, IMPALA confirmed it would oppose the sale before the regulators and expects them to move quickly to block the deal.

IMPALA takes the view that even if Universal proposes to increase the €500m divestments it is prepared to make, the deal will not be accepted. It points out that the last time the European Commission looked at Universal, it ordered the company to sell off assets to cut it down to an acceptable size. Since that decision, Universal has grown, which makes it even less likely that the regulators would accept any new acquisitions. In addition, IMPALA has already asked the European Commission to investigate Universal’s tie-up with Live Nation.

Helen Smith, Executive Chair of IMPALA, commented: “Given that Brussels has taken a previous decision that Universal should not be any bigger, we would expect the sale to Universal to be blocked outright, even if it offers to increase the divestments it is prepared to make. The same would apply to Sony if it buys EMI publishing. IMPALA will be discussing this in detail at its next board meeting in ten days time.”

The reason the EC forced divestments in its UniversalBMG decision was because it found that Universal controlled so much music it was bound to abuse its position, even with larger players such as Apple. Due to the multiplier effect market power has on players who are already dominant, even a very small increase would severely harm competition. IMPALA takes the view that this means even significant divestments are not an option. The same applies to Sony if the rumours that Sony is going to buy EMI publishing are true.

Arguments about the current state of the music market are unlikely to convince regulators they should change approach, in the opinion of IMPALA, since the impact of Universal is one of the causes of market decline. In addition, both the European Commission and the European Parliament have recently called for competition rules to be adapted to the specificities of the cultural sector, where the vast majority of innovation comes from smaller actors. In music, over 80 percent of all new releases are produced by the independents, or SMEs as they are referred to by policymakers. IMPALA is concerned that more time will be lost when the sector should be working together on other issues. IMPALA expresses regret that EMI will continue to languish and urges the regulators to act quickly to reduce the impact on EMI’s artists.