The European Commission will begin a formal antitrust investigation into Universal Music Group’s planned acquisition of Downtown Music later this month, according to a Reuters report.
The European Union’s competition regulator is expected to begin the four-month probe of UMG’s Virgin Music Group’s $775 million bid for Downtown after its standard preliminary review of the deal wraps up on July 22, says Reuters, citing three anonymous sources.
The deal, which UMG has said could close later this year, has triggered waves of backlash from independent music trade organizations and companies who object to the world’s largest music company being allowed to acquire one of the few remaining standalone services powering distribution for independents.
A spokesperson for the European Commission did not immediately respond to a request for comment.
A UMG rep declined to comment because it is awaiting the European Commission’s decision. The company went on to say, “We do, however, remain confident that the combination of Virgin and Downtown will create an improved offering in the growing and highly competitive label services category that today 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. “
Founded in 2007 in New York, Downtown Music Holdings is the parent company of the direct-to-creator distributor CD Baby, and the direct-to-business technology and distribution platform FUGA, as well as SongTrust and several other companies.
Independent music organizations IMPALA, Beggars Group, A2IM and Secretly Group and others have called for regulators to block the deal, objecting to it on anticompetitive grounds. Some have voiced concerns that UMG could gain access to data from the indies that use FUGA as their pipeline to the broader marketplace.
Virgin’s co-CEOs Nat Pastor and JT Meyers pushed back against those claims in a note sent to staff in early July, saying the Downtown deal would strengthen Virgin’s foundation and add to the flexibility it can offer clients of its indie services.
UMG most recent acquisition of an independent music company came last fall when it expanded its ownership stake in [PIAS], an indie label group that includes Play It Again Sam, harmonia mundi and Spinefarm. At the time, a UMG executive said the deal “enhances our ability to support the independent artist and label community globally.”
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