Europe’s competition watchdog – the European Commission – revealed in April that it was preparing to investigate Universal Music Group‘s proposed acquisition of Downtown Music Holdings.
UMG was required to formally notify the EU about the deal, which would kickstart a Phase 1 investigation, at the end of which we’ll find out if the deal has been approved or raises serious competition concerns.
We won’t have long to wait.
An update filed by the regulator on Monday (June 16) confirms that UMG has notified the EC about the deal. The EC has set a provisional deadline of July 22 to make its decision in the Phase 1 investigation.
UMG’s Virgin Music Group revealed in December that it had agreed to buy Downtown Music Holdings LLC in a $775 million deal.
The UMG-Downtown deal did not meet the EU’s standard turnover thresholds that would typically require notification to Brussels, bit 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.
The competition authority has 25 working days to conduct its Phase 1 investigation, examining whether the alleged “concentration” raises serious competition concerns.
The formal Phase 1 notification period represents a crucial milestone in the regulatory process.
If the Commission identifies serious competition concerns during its initial review of the proposed deal, the case could progress to a more extensive Phase II investigation lasting up to 90 working days.
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.
Read MBW’s recent Article 22 explainer for a detailed breakdown of how the investigation process works.
The acquisition would significantly expand UMG’s artist and label services capabilities through Virgin Music Group, adding Downtown’s portfolio of companies including FUGA, CD Baby, and Curve Royalty Systems to Universal’s global operations.
“We are confident that we will close this acquisition in the second half of the year, on its original timeline.”
UMG statement issued in April
Independent label representatives have criticized UMG’s proposed deal to buy the company. In April, Brussels-based IMPALA, which represents over 6,000 independent music companies in Europe, welcomed the European Commission’s decision to investigate the proposed deal.
UMG remains confident about the deal’s prospects, stating 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.”Music Business Worldwide
