Outcry as EC greenlights Sony BMG merger

Independent music labels are in uproar over the European Commission's decision yesterday to give the green light to Sony BMG's 2004 merger without any remedies, calling for a formal enquiry into the merger review process due to "potential maladministration" and threatening litigation against the regulator.

The EC was called on to review the 2004 merger of the two music giants after the European Court of First Instance upheld a complaint made by Impala, the global independent music trade body, that the tie-up reduced competition. The EC was widely expected to re-approve the merger but with a series of behavioural remedies or requirements to dispose of certain assets to address concerns over Universal Music and Sony BMG's increasing dominance.

However, the EC yesterday gave its blessing to the merger as it stands. Neelie Kroes, the EU anti-trust commissioner, said its thorough investigation "clearly shows that the merger would not raise competition concerns in any of the affected markets".

Impala reacted with fury, accusing the Commission of ignoring evidence that the market was turning into a "duopoly" with the two largest companies controlling 50 per cent of the market and 70 per cent of the vital Top 100 charts in many key EU territories – a dominance that even rival music majors EMI and Warner Music have struggled to match. "We do not understand how the Commissioner can say she has found no problems," Impala, which represents 3,500 record labels, said.

The trade body said the EC's ruling clearly contradicted the findings of the Court of First Instance that the merger between Sony and BMG had made it harder for independents to promote new artists. It said the decision was "indefensible" and pledged to call on the European Ombudsman to "investigate potential maladministration". It plans to appeal the decision and believes there is also a clear case for claiming damages against the EC.

Patrick Zelnik, president of Impala, said: "The EC has ignored the simple fact that four companies control 95 per cent of the music most citizens hear on the radio throughout the world. What kind of message does that send out?"

Alison Wenham, head of UK independent music trade body AIM, said there appeared to be a suggestion that the EC had only looked at the effect the merger has had over the past year, but not at its future impact. "I do not believe a duopoly is healthy for the consumer or for the music industry," she said.

Ms Wenham has led the charge in complaining to the Office of Fair Trading over Universal's "creeping dominance" of the sector after it snapped up two small independent labels.