EU Issues UMG-Downtown Deal ‘Statement of Objections’

Photo Credit: Universal + Downtown

The European Commission has issued a “statement of objections” concerning Virgin Music Group’s proposed Downtown Music buyout, which the EU executive branch believes “may restrict competition in the market for the wholesale distribution of recorded music.”

The EC just recently made that statement official, days after evidently well-placed sources pointed to an imminent development in the months-running investigation. In summarizing the forthcoming objections, said sources specifically mentioned the transaction’s perceived potential to compromise indies’ commercially sensitive data and artist-services capabilities.

Admittedly, those rumblings weren’t exactly groundbreaking given the language used in the Commission’s initial investigation disclosure as well as newer announcements. However, they were apparently accurate with regard to the objections’ direction.

In its brass-tacks overview, the EC confirmed concerns that Universal Music Group might “have the ability and incentive to gain access to commercially sensitive data that is stored and processed by Downtown’s Curve and that such information advantage for UMG would hamper rival labels’ ability and incentive to compete.”

Important for several reasons, this seemingly straightforward hang-up definitely doesn’t appear an insurmountable obstacle for the $775 million deal. Without digging too far into the multifaceted subtopic (or the selling business’s many divisions) here, it’s worth reiterating, at the top level, that Downtown only purchased the royalty processor in early 2023.

The Commission’s focus on Curve as opposed to different Downtown units wasn’t lost on IMPALA. In a statement shared with DMN, the organization expressed support for the EC’s reservations, doubled down on longstanding calls to block the play outright, and, in keeping with the latter position, indicated that the “data concerns…cannot be resolved by remedies.”

“As we said last week,” IMPALA communicated in part, “we look forward to seeing more detail on the specifics of the objections. We believe this acquisition should be prohibited outright – data concerns arising from horizontal overlaps cannot be resolved by remedies as the EC’s own guidelines make clear.

“In addition, our members have consistently flagged that such data issues (which extend beyond Curve to include FUGA and other entities in the Downtown family) have to be viewed in the wider context of multiple concerns around the digital market, the whole ecosystem, cultural diversity and the removal of a significant competitor,” IMPALA proceeded.

As for where the EC investigation goes now, the previously established February 6th final-decision deadline remains in place.

More immediately, Universal Music can formally oppose the objections and request an oral hearing; when reached for comment, the major noncommittally highlighted ongoing plans “to work constructively with the Commission toward a successful conclusion of this process.”

“A statement of objections is a normal step in the regulatory process in which the European Commission provides details on its concerns,” a UMG spokesperson said to DMN. “This deal is about offering independent music entrepreneurs access to world-class tools and support to help them succeed. We look forward to continuing to work constructively with the Commission toward a successful conclusion of this process.”

Notwithstanding the vocal acquisition criticism from IMPALA and others, some in the indie community support the buyout and haven’t been shy about voicing their position.

Another angle that hasn’t received a ton of attention from the regulatory perspective: Universal Music, massive international presence aside, isn’t buying up and moving a European company with the proposed Downtown deal.

Despite an investor push to relocate UMG’s corporate HQ, the Euronext Amsterdam-listed business is “headquartered in the Netherlands,” the Commission reiterated in its announcement. Meanwhile, Downtown is based in the U.S., the EC also pointed out.

During today’s trading, Universal Music stock (Euronext: UMG) slipped by about 3.7% to finish at €21.84 (currently $25.16) per share.