EU Kicks Off Formal Investigation of UMG’s $775 Million Downtown Acquisition

UMG’s $775 million offer for Downtown Music hits a snag as the EU investigates concerns the deal could stifle artists signed with independent labels.

Universal Music Group (UMG) has offered $775 million to acquire Downtown Music Holdings, but the deal has been put on hold amid a formal investigation by European Union watchdogs. The investigation comes amid concerns that the deal could leverage advantages for UMG to shut out smaller competitors’ access to vital industry services.

“By acquiring Downtown, UMG would purchase a large provider of services for labels that compete with UMG and for artists,” said EU economy commissioner Valdis Dombrovskis. “Opening an in-depth investigation will allow us to assess more carefully whether this acquisition would have a negative impact on artists, labels, and ultimately, European consumers.”

UMG’s projected timeline for the acquisition “remains unchanged,” but the company may be forced to offer concessions to appease watchdogs with antitrust concerns. These typically involve promising a list of dos and do-nots, as well as commitments to divest overlapping businesses.

A spokesperson for Universal told Bloomberg that the company will continue to work constructively with the commission. It aims to “address the willful misrepresentation of market data by self-interested parties who represent a tiny fraction of the thousands of independent labels that make up the independent community globally.”

As DMN reported last month, the EU’s investigation was already ongoing and was preparing to launch into “phase two,” which led to the formal probe. The commission had until July 22 to decide whether to green-light UMG’s proposed offer or delve into further investigation. Sources indicated at the time that a more involved probe would be the most likely scenario.

The EU’s involvement has paved the way for others in the UK music market to chime in on the repercussions of such a significant merger. “The news about the EU shows the way for other jurisdictions to follow,” said Gee Davy, CEO of London’s AIM. “The music sector deserves to remain innovative and accessible to all.”