EU to launch full probe into UMG’s $775m Downtown Music deal

According to a Reuters report published on 16 July, citing “three people with direct knowledge of the matter,” the deal is likely to proceed to a Phase II investigation, a more detailed review of its potential impact on competition in the music industry.

UMG’s Virgin Music Group announced in December that it had agreed to acquire Downtown Music Holdings LLC in a transaction valued at $775 million. Although the deal did not meet the European Union’s standard turnover thresholds, it triggered notification requirements in the Netherlands and Austria. The Dutch competition authority referred the case to the European Commission under Article 22 of the EU Merger Regulation — a mechanism that allows member states to refer cases that may affect competition within the internal market. Austria subsequently joined the referral.

In April, the EC confirmed that it was preparing to examine the acquisition. After UMG formally notified the Commission, a provisional deadline of 22 July was set for the conclusion of an initial 25-working-day Phase I investigation.

If competition concerns are raised during this Phase I review, the Commission can initiate a more extensive Phase II investigation lasting up to 90 working days — a move that Reuters suggests is now imminent. The Commission may extend the Phase II review by a further 15 or 20 working days if necessary.

In a statement to Music Business Worldwide, a UMG spokesperson said: “Given that the European Commission has not announced a decision, we are unable to comment.”

They continued: “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.

“We look forward to continuing to work closely and constructively with the Commission to convey the benefits this transaction will bring to the independent community, as well as to address the wilful misrepresentation of market data by self-interested parties who represent a tiny fraction of the thousands of independent labels that make up the broader independent community globally.

“Our initial projected timeframe for the completion of the transaction remains unchanged.”

The EC describes a Phase II investigation as “an in-depth analysis of the merger’s effects on competition,” reserved for cases that cannot be resolved in Phase I. According to the Commission’s website, the Phase II review must be completed within 90 working days of opening, unless extended.

More than 90% of mergers notified to the EC are typically cleared in Phase I without conditions, suggesting that fewer than 10% move to Phase II scrutiny. Following the Phase II process, the Commission can approve the deal (with or without conditions) or block it altogether if competition concerns are not satisfactorily addressed.

As the regulatory review continues behind closed doors, debate within the global music industry surrounding the acquisition has intensified.

Earlier this month, Virgin Music Group’s leadership criticised what they described as “juvenile and offensive falsehoods” spread by opponents of the deal.

More than 200 individuals, including 20 employees from prominent independent music companies such as Beggars Group and Secretly Group, recently signed a letter objecting to the takeover.

On 2 July, the European Composer & Songwriter Alliance (ECSA) issued an open letter urging the European Commission to block the acquisition, citing concerns about its potential impact on competition and the broader independent music ecosystem.