On October 26, 2018 the European Commission (“Commission”) unconditionally approved Sony Corporation of America’s (“Sony”) acquisition of control of EMI Music Publishing (“EMI”). The USD 2.7 billion (GBP 1.7 billion) acquisition results in Sony becoming the world’s largest music publisher.

Background. EMI is currently jointly controlled by Sony and Mubadala, with its catalogue being administered by Sony/ATV. On May 21, 2018, Sony announced it had agreed to acquire sole control over EMI. When Sony and Mubadala acquired joint control of EMI in 2012, the Commission’s approval was conditional upon the divestiture of worldwide publishing rights in four catalogues and the musical works of 12 contemporary authors.

Third-party concerns. A number of third parties pushed for a Phase II investigation of the concentration. Those third parties took the view that the concentration would create a publisher so large that it could be expected to have significant negative effects on the market. Opponents of the concentration included the European Composer and Songwriter Alliance and the British Academy of Songwriters, Composers and Authors. The Chief Executive of one particularly vocal critic of the deal, the European independent labels association, IMPALA, argued that the concentration would “harm consumers in an already overly concentrated music market”. Research conducted by IMPALA suggested that the concentration would give Sony control, on average, over 70% of the music charts across Europe.

No remedies. Despite these concerns, Sony did not offer remedies. Commentators suggested that, given how much both Sony and the overall music business have changed in the past few years, a Phase II investigation might not have been surprising. Direct licensing, driven by the surge in digital media, and Sony’s expansion of its distribution business were identified by commentators as elements that could raise significant competition concerns about innovation in the digital market. Another potential source of concern was the opportunity for Sony to exercise its controlling interest in EMI to integrate it with other operations, potentially harming consumers.

Unconditional clearance from the Commission. In clearing the transaction unconditionally, the Commission found that the concentration would not result in increased market shares in any of the markets in which both Sony and EMI operate, because Sony already exercises joint control over EMI. Instead, the Commission’s investigation focused on whether Mubadala constrained Sony’s ability to leverage its power across music publishing and music recording rights. The Commission considered three particular areas:

  1. The provision of music publishing services to authors. The Commission concluded that the deal did not raise competition concerns because Sony and EMI had not competed to sign new authors since 2012 and that, prior to the acquisition, Mubadala had not constrained Sony’s conduct.
  2. The exploitation of copyright offline. The Commission dismissed this concern because Sony/ATV already held the sole and exclusive right to license EMI’s publishing rights offline.
  3. The exploitation of publishing rights for online use. The Commission found that the acquisition would not increase Sony’s bargaining power with respect to online platforms because it would also have been in Mubadala’s interest to pursue any strategy to secure better terms from online platforms pre-transaction. In any event, the Commission found that authors could credibly threaten to switch away from Sony if it attempted to devalue their publishing rights for the benefit of its recording division. Finally, the acquisition would not significantly increase Sony’s bargaining position vis-à-vis digital music providers compared to its current situation, and online platforms would continue to have access to both Sony’s and third parties’ repertoire to operate in the EEA.