1.8.2013 EN Official Journal of the European Union C 220/15

Summary of Commission Decision of 21 September 2012 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case COMP/M.6458 — /EMI Music) (notified under document C(2012) 6459) (Only the English text is authentic) (Text with EEA relevance) (2013/C 220/08)

On 21 September 2012, the Commission adopted a decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings ( 1) (hereinafter referred to as the ‘Merger Regulation’), and in particular Article 8(2) of that Regulation. A non-confidential version of the full decision can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address:

http://ec.europa.eu/comm/competition/index_en.html

I. THE PARTIES of the Merger Regulation, by which the undertaking UMHL acquires, by way of purchase of shares, control within the (1) Universal Music Holdings Limited (‘UMHL’) is a wholly- meaning of Article 3(1)(b) of the Merger Regulation of the owned subsidiary of Universal International Music BV, recorded music assets of EMI Group. which is the parent company of the Universal Music Group (‘Universal’ or the ‘notifying party’, UK). Universal is the world's leading recorded music company. It is active in the discovery, development and promotion of recording (5) On 11 November 2011, Vivendi and Universal, on the artists (so-called ‘artists & repertoire’ or ‘A&R’) and in the one hand, and EMI Group, on the other hand, entered wholesale of recorded music. It also has activities in other into a Share Purchase Agreement pursuant to which fields, such as online music retail, music publishing, artist Universal would acquire EMI Group's activities in A&R management, merchandising, event management, and and in the wholesale of recorded music, as well as EMI event venue services. Universal is ultimately owned by Group's retail recorded music activities, certain limited Vivendi SA. publishing rights (mainly those held by EMI Christian Music Group) and artist management and merchandising activities. For the purpose of the Commission decision, the assets subject to the proposed transaction are together (2) Vivendi SA (‘Vivendi’, France) is Universal's ultimate parent referred to as ‘EMI’. company. Vivendi is an international media company whose activities include telecommunications, the creation and distribution of content and TV channels, digital music retail and videogames. (6) As a result of the proposed transaction, EMI would be solely controlled by Universal. The transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. The transaction (3) EMI Group Global Limited (‘EMI Group’, UK) is active in has an EU dimension pursuant to Article 1(2) of the the discovery, development and promotion of recording Merger Regulation. artists and in the wholesale of recorded music. EMI Group also has activities in other fields, such as music retail, music publishing, artist management and merchan­ dising. III. SUMMARY

(7) After examination of the notification, the Commission adopted a decision on 23 March 2012, concluding that II. THE OPERATION the operation falls within the scope of the Merger Regu­ lation and raises serious doubts as to its compatibility with (4) On 17 February 2012, the Commission received a notifi­ the internal market and the functioning of the EEA cation of a proposed concentration pursuant to Article 4 Agreement. The Commission therefore decided to initiate proceedings pursuant to Article 6(1)(c) of the Merger ( 1 ) OJ L 24, 29.1.2004, p. 1. Regulation. C 220/16 EN Official Journal of the European Union 1.8.2013

(8) On 19 June 2012, a statement of objections was addressed resell them to end users. In addition, record companies can to the notifying party pursuant to Article 18 of the Merger also license their repertoire to audio or video digital Regulation. Universal replied to the statement of streaming service providers. objections on 6 July 2012.

(15) There are various categories of physical retailers (in (9) In order to address the competition concerns identified in addition to wholesalers, which act as intermediaries the statement of objections, the notifying party submitted between record companies and retailers), of which the commitments on 27 July 2012. The time limit for the main types are hypermarkets/supermarkets (so-called adoption of a decision pursuant to Article 8 of the ‘mass merchants’), e-tailers and specialist retailers. Merger Regulation was therefore extended by 15 working days pursuant to Article 10(3) of that Regulation. The notifying party offered a new set of commitments on (16) Regarding digital retail channels, the principal means of 13 August 2012, which were subsequently amended on online music dissemination are through downloading 25 August 2012. and streaming. Downloads currently account for the large majority of online revenues. Streaming services are, however, on the rise and many market participants expect streaming revenues to grow significantly in the future. IV. EXPLANATORY MEMORANDUM

1. Introduction (17) Streaming technology has also allowed for new platforms (10) The centre of gravity of the proposed transaction is the and business models to develop over the last few years. recorded music sector, as this comprises the core of the Internet service providers and mobile network operators activities of each of Universal and EMI. The recorded music increasingly offer music streaming services, either by sector in the EEA today is characterised by the presence of developing their own branded services (often bundled four worldwide record companies (Universal, Sony, EMI with telecom subscriptions) or via partnerships with and Warner; together the so-called ‘majors’) and a large existing streaming platforms. Some streaming services number of significantly smaller record companies (the so- also have partnerships with social networking sites. called ‘independents’ or ‘indies’). Finally, cloud music services that offer users the ability to store their acquired music on remote servers have emerged.

(11) The recorded music industry as a whole has experienced a significant decrease in music sales in the last decade both 2. The relevant markets globally and in the EEA as a result of the availability of music via legal digital services as well as digital piracy. A. A&R Despite this decline hitting the physical sales most severely, sales of physical music still account for around (18) In its previous decisions relating to the recorded music 80 % of total music sales in the EEA. Sales of digital music sector ( 1), the Commission never defined an upstream are expected to significantly increase over the next years market for A&R. It is, however, the case that A&R and to reach a tipping point where they will exceed sales services are provided to different market players (artists) of physical music. and entail a different organisation within record companies compared to the downstream wholesale activities. There are also certain competitive dynamics, which are specific to A&R. (12) The value chain in the recorded music sector begins with the discovery and development of artists and the subsequent recording of their music, with a view to exploiting the copyright in the resulting sound recordings, (19) The Commission concluded that it is not necessary to take an activity known as A&R. Success or failure in A&R is a view as to whether A&R activities should be considered key to success in the markets for recorded music. and analysed as a separate product market or even whether the recorded music market should be viewed as a two-sided market, where the strength of a record company on one side of the market (A&R) has a (13) The next level of the recorded music value chain comprises positive influence over its market position on the other the sale or licensing by record companies of their side of the market (wholesale of recorded music) and repertoire to wholesalers and retailers, as well as to conversely. The strength of record companies in A&R certain categories of end users (namely TV and radio was taken into account by the Commission in the broadcasters). competitive assessment of the proposed transaction as one of the key factors contributing to record companies' market position in the market for the wholesale of recorded music and vice versa. (14) Recorded music includes a wide variety of physical

products (such as CDs — singles, albums/compilations ( 1 ) Commission decision of 3 October 2007 in Case COMP/M.3333 — — and DVDs — audio and video) and digital products, Sony/BMG; Commission decision of 15 September 2008 in Case sold by the record companies to retailers which, in turn, COMP/M.5272 — Sony/Sony BMG. 1.8.2013 EN Official Journal of the European Union C 220/17

B. Wholesale of recorded music both physical and digital formats, comprising both legitimate and unauthorised supplies of music (that is, to (20) The Commission in the past identified separate product say piracy). In support of that claim, the notifying party markets for the wholesale of physical music and of argued that there is strong evidence of substitution by 1 digital music ( ). Within the digital music market, the consumers between these music formats and sources, Commission left open the question whether there are including between pirated and authorised music. separate product markets for digital music delivered for online applications and mobile applications, or for down­ loading and streaming. The Commission also did not identify separate product markets based on genre (e.g., (28) The Commission has never considered in its past decisions pop, classical, jazz, etc.) or for single artist albums and that legal and illegal music belong to the same product compilations. The market investigation in this case has market. However, the market investigation in the not revealed any new material element which would Sony/BMG case ( 2 ) revealed that piracy exerts a competitive justify departing from these precedents. constraint on record companies in certain territories.

(21) The Commission concluded that audio music and video music belong to the same product market for the (29) The Commission concluded that assessing the degree of wholesale of recorded music (whether physical or digital). substitution between legal and illegal music and the extent to which consumers mix and match between legal and illegal music is not relevant to determine whether illegal (22) The Commission concluded that a separate product market music should be considered as part of the market for the should be identified for the wholesale of recorded music to wholesaling of recorded music. This reflects the fact that, end users licensing recorded music from producers’ music regardless of whether legal and illegal music are to be licensing companies. As regards retailing of recorded considered as substitutes from the point of view of end music, the Commission did not consider it necessary to users, they do not appear to be substitutes from the point take a view on the definition of a relevant product market. of view of the record companies' direct customers — physical and digital music retailers. By the same token, C. Music-related activities outside the recorded music sector pirate services do not compete with record companies. They are not active in A&R and they are not active in (23) In line with its precedents, the Commission concluded that the wholesale supply of recorded music to physical and manufacturing and logistics activities fall outside the scope digital customers. of its assessment. In addition, the Commission did not take a view on the definition of a relevant product market for other ‘ancillary’ services (such as artist management services, merchandising and live show and (30) Thus, the Commission concluded that it is not appropriate event management services). Finally, the Commission from the demand or from the supply side, to consider concluded that online publishing rights should be legal and illegal music as part of the same relevant considered as a separate product market. product market for the wholesale of recorded music. However, this conclusion is without prejudice to the analysis made by the Commission of piracy as a possible D. Geographic scope of the market out-of-market constraint on record companies' pricing and output decisions in the context of the competitive (24) The Commission concluded that the market for the assessment of the proposed transaction. wholesale of physical recorded music is national in scope.

(25) As regards the wholesale of digital recorded music, the 3. Competitive assessment Commission did not consider it necessary to take a view on the exact geographic market definition given that the A. Horizontal non-coordinated effects transaction raised concerns on both an EEA-wide and national levels. M a r k e t s h a r e s (31) The Commission's theory of harm in this case is not (26) The Commission did not consider it necessary to take a predicated on a particular market share threshold being view on the definition of a relevant geographic market exceeded. Indeed, the Commission makes clear that regarding A&R, retail of recorded music, ancillary market shares are but a first indication of market power services and music publishing. and must be put into the overall context of the relevant markets. In line with the Guidelines on the assessment of horizontal mergers under the Council Regulation on the E. Piracy control of concentrations between undertakings ( 3 ) (‘Hori­ zontal Merger Guidelines’), a significant impediment to (27) The notifying party claimed that there should be a single effective competition is likely to arise in cases where the market encompassing the wholesale of recorded music in

( 2 ) Commission decision of 3 October 2007 in Case COMP/M.3333 — ( 1 ) Commission decision of 3 October 2007 in Case COMP/M.3333 — Sony/BMG. Sony/BMG, recital 27. ( 3 ) OJ C 31, 5.2.2004, p. 5. C 220/18 EN Official Journal of the European Union 1.8.2013

merged entity would have an appreciably larger market From a structural point of view and on the face of market share than the next competitor post merger. It is shares and the chart and radio airplay data, the existing therefore the indication that market shares give of the competitive dynamics, which are based on a certain overall post-merger strength of the merged entity and its balance of power between, at least, the majors (despite relative position to its competitors after the merger that Universal's already existing market leadership), would be drives the Commission's competitive assessment in this completely altered by the proposed transaction in favour case. of the merged entity.

(32) The analytical framework is all the more relevant in this E M I a s c o m p e t i t o r case given that no industry source gives a completely reliable view of the merged entity's position post merger. (36) The Commission concluded that EMI is one of the four Whilst in previous decisions relating to the recorded music majors currently active in the recorded music sector industry the Commission used IFPI data, in this case the worldwide, with a significant artist roster and music notifying party strongly contested the use of IFPI data and repertoire comprising a formidable back catalogue and argued it is unreliable, providing alternative ‘market share’ strong new releases. EMI is also likely to be Universal's data based on iTunes and Spotify sales as well as retail closest competitor in relation to at least classical music. sales data gathered by GfK and the OCC. The proposed transaction therefore would result to the elimination of an important competitive force from the relevant markets. (33) The Commission ultimately considered all data sources, including wholesale data gathered from various digital service providers. Furthermore, the Commission carried out a relativity exercise between the four majors on a C u s t o m e r s ' l i m i t e d p o s s i b i l i t i e s o f hypothetical market consisting only of the four majors s w i t c h i n g s u p p l i e r in order to assess Universal's and EMI's market position (37) The Commission concluded that post transaction, the vis-à-vis the other majors (the independents, albeit together merged entity's repertoire will (continue to) be ‘must holding a not unsubstantial market position, cannot be have’ and customers will therefore likely have limited (if viewed as a single entity). Finally, the Commission also any) ability to switch supplier and the merged entity's took into consideration what chart data and radio ability to exploit customers will likely significantly airplay data showed, although this data cannot be increase. equated to market shares.

(34) Following the analysis of all the data sources, the A n t i - c o m p e t i t i v e e f f e c t s o n d i g i t a l Commission concluded that the proposed transaction d i s t r i b u t i o n o f m u s i c would result in the creation of a dominant ‘super-major’ twice (or even three or more times, in certain Member (38) The Commission's investigation showed that Universal States) the size of its next largest competitor at the EEA already before the proposed transaction has the ability level and in several Member States as well as Iceland and and incentive to obtain licensing terms and conditions Norway. In more detail, in respect of physical recorded from digital customers that are more favourable to music, the merged entity would be more than twice the Universal as compared to those obtained by its size of the next largest competitor in at least eight Member competitors. These conclusions are based on three States — Cyprus, the Czech Republic, Ireland, sources of evidence: (i) the comparison of the respective Luxembourg, the Netherlands, Romania, Sweden and the agreements of Universal and EMI with online platforms; (ii) United Kingdom, as well as Iceland, three or more times evidence from the Commission's market investigation; and larger than the next largest competitor in at least five (iii) evidence from the merging parties. The evidence from further Member States — Belgium, France, Greece, each of these sources is further corroborated by the Poland and Slovakia as well as Norway, and more than quantitative analysis undertaken by the Commission. four times larger than the next largest competitor in Bulgaria, Estonia and Lithuania. In Slovenia, the merged entity would become the clear leader among the majors. In respect of digital recorded music, the merged entity (39) First, the Commission conducted a review of the would be twice or more the size of the next largest commercial agreements of each of Universal and EMI competitor at the EEA level and in at least 16 Member with a selection of key digital customers, focusing on States — Austria, Belgium, Bulgaria, Estonia, France, key commercial terms (including remuneration, the level Greece, Ireland, Lithuania, Luxembourg, Malta, the Nether­ of advance payments that digital customers need to make, lands, Poland, Portugal, Romania, Sweden and the United commitments in relation to promotion and advertising Kingdom as well as Iceland and Norway. and most favoured nation (‘MFN’) clauses). This analysis showed that Universal on the whole obtains better terms on various key parameters of negotiations with digital platforms as compared to EMI and that this difference is (35) In conclusion, the merged entity would have been the particularly marked for smaller platforms (download and undisputed market leader by a distance post merger. streaming). 1.8.2013 EN Official Journal of the European Union C 220/19

(40) The Commission concluded that the differences in the the music publishing sectors. The Commission considered contractual terms that Universal, which is already the control shares as an ‘aggravating factor’, which exacerbates largest recorded music company in the EEA, and EMI the anti-competitive effects of the proposed transaction currently obtain constitute an indication of the likely deriving from the combination of the merging parties' negative effects on competition of the proposed trans­ activities in the recorded music sector (which, in and by action. Indeed, the substantial increase in Universal's size themselves, are sufficient to give rise to competition post merger, would be likely to increase Universal's concerns). The control share analysis carried out by the bargaining position further, thus potentially resulting in Commission reinforced the Commission's findings that the not only the extension of Universal's current terms to proposed transaction would likely lead to a significant EMI repertoire, but to an overall increase in the terms impediment to effective competition. for the combined repertoire.

(41) The Commission also carried out a quantitative analysis E f f e c t o n c o n s u m e r c h o i c e a n d i n n o ­ with a view to assessing whether, due to the increased v a t i o n size of the merged entity, the proposed transaction is likely to increase the merged entity's bargaining power (47) The Commission concluded that the proposed transaction vis-à-vis digital customers and, as a result, to lead to would likely decrease innovation and consumer choice in higher prices for these customers. two ways: (i) the proposed transaction would likely increase Universal's bargaining power and ability to impose onerous licensing terms on digital platforms, in (42) To this end, the Commission gathered digital music sales particular small and emerging innovative music platforms. data from six major digital customers, as well as from six Such onerous licensing terms are likely to have a negative recorded music companies, across several Member States. impact on the development of these customers and their The Commission then carried out a quantitative analysis of ability to geographically expand to the various digital this data, essentially consisting of testing through statistic markets; and (ii) the merged entity would likely have an and econometric tools, whether there is a positive increased ability and incentive to influence the business correlation between the size of a recorded music model and characteristics of new digital music services company and its ability to extract better terms from and impose price increases on the retail market(s). As a digital customers. result, the proposed transaction will also have a negative impact on cultural diversity. The Commission therefore concluded that the proposed transaction would likely (43) This analysis demonstrated that: (i) the rent that recorded decrease innovation and consumer choice. music companies can extract increases with their size (measured in terms of the share of revenues that a recorded music company’s repertoire contributes to an online platform); (ii) this effect is particularly pronounced (48) The Commission concluded that these findings apply for relatively small online platforms, but is also present in equally to the market for the wholesale of recorded platforms with significant bargaining power; and (iii) there music at the EEA level, as well as in each of Austria, is a positive relation between the size of a recorded music Belgium, Bulgaria, Czech Republic, Denmark, Estonia, company's repertoire and the wholesale price it negotiates Finland, France, Germany, Greece, Ireland, Italy, Latvia, with online platforms. Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom, as well as in Iceland and Norway. (44) The Commission's conclusions based on the analysis of the commercial terms and conditions the merging parties have with various digital customers and on the quantitative analysis were corroborated by submissions that digital F o r e c l o s u r e o f c o m p e t i t o r s f r o m t h e customers and other third parties have made throughout m a r k e t s f o r t h e w h o l e s a l e o f p h y s i c a l the Commission's investigation, as well as by certain a n d d i g i t a l m u s i c Universal internal documents. (49) The Commission also investigated whether the proposed transaction could give the merged entity the ability and the (45) The Commission thus concluded that, due to its increased incentive to partially foreclose the merged entity's size in the wholesale of recorded music to digital competitors from the markets for the wholesale of customers, the merged entity would likely apply worse physical and digital music, as well as from A&R, to the commercial conditions, including higher prices, to digital detriment of competition and, ultimately, consumers, and customers if the proposed transaction were to go ahead in cultural diversity. the form originally notified.

C o n t r o l s h a r e a n a l y s i s (50) Such foreclosure could potentially take place through the ability and incentive of Universal, due to its increased size (46) The Commission considered that, in order to assess the post merger, to guarantee to its artists significantly better degree of market power held by the merged entity vis-à-vis access to promotional opportunities (e.g., exposure at mass digital music retailers following the proposed transaction, merchants, and digital customers, access to compilations it is also necessary to consider the merged entity's and to radio airtime) than its competitors, including to an combined market position in the recorded music and in extent greater than its actual market share. C 220/20 EN Official Journal of the European Union 1.8.2013

(51) Increased access to all these promotional opportunities physical retail distribution, music video services, electronic could result in the merged entity being able to sign the communications, TV and film production and distribution, best artists, including at better conditions than other games and interactive entertainment and events ticketing record companies, by offering them greater access to services. promotion. Competitors could find it increasingly difficult to compete with the merged entity to sign new artists which in turn could weaken these competitors' D. Conclusion position vis-à-vis customers as their repertoire would become less attractive and, conversely, strengthen the (58) The Commission concluded that the proposed transaction, merged entity's position giving rise to a self-perpetuating as notified, would lead to a significant impediment to vicious circle. effective competition, in particular as a result of the creation of a dominant position, in the markets for the wholesale of digital music at the EEA level, as well as in 24 (52) Ultimately, however, the Commission concluded that there Member States, namely: Austria, Belgium, Bulgaria, Czech are not sufficient elements to prove to the requisite legal Republic, Denmark, Estonia, Finland, France, Germany, standard that the transaction would be likely to result in Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, foreclosure of competitors. In any event, the commitments Malta, the Netherlands, Poland, Portugal, Romania, proposed by the notifying party, whilst solving the anti- Slovakia, Spain, Sweden and the United Kingdom, as competitive effects described above in relation to well as Iceland and Norway. commercial terms with digital customers, would also solve any foreclosure concerns. 4. Commitments

(59) The notifying party submitted formal commitments on P i r a c y 27 July 2012 which were put to the market test the same day. Overall, the market test showed that the (53) The Commission concluded that the existence of piracy commitments of 27 July 2012 presented a number of would not deprive the merged entity of its ability and significant shortcomings which would have to be incentive to exercise its bargaining power vis-à-vis addressed. retailers after the proposed transaction. While piracy may reduce the size of the overall market, the Commission concluded that there is no evidence that it would constrain recorded music companies in their commercial (60) The Commission informed the notifying party of the behaviour today or post merger. results of the market test on 9 August 2012 at a state of play meeting. To address the shortcomings identified by the Commission, taking into account the results of the market test as well as further information provided by B u y e r p o w e r the notifying party on the proposed commitments, the notifying party offered a new set of commitments on (54) The Commission concluded that customers would not be 13 August 2012 which were subsequently amended on in a position to exert buyer power as a countervailing 25 August 2012. factor to an increase of the merged entity's market power.

(61) The main improvements to the package of 27 July 2012 E n t r y consisted of: (i) additional owned content (Anglo repertoire as well as Danish and Spanish repertoire); (ii) (55) The Commission concluded that it is unlikely that a timely the addition of EMI's share in a previously carved-out and sufficient entry by competitors in the relevant French entity Play.on; (iii) divestment of worldwide rights recorded music markets would counter the anti- (as opposed to EEA-wide in the commitments of 27 July competitive effects arising from the proposed transaction. 2012); (iv) a commitment to sell at least two thirds of the package (EMIRL, Pink Floyd and the local entities) to a single purchaser; (v) requirement that the purchaser B. Coordinated effects should be a company in a group which is either currently or was previously active in the recorded music (56) The Commission concluded that the markets for the or music publishing industry; (vi) a commitment not to re- wholesale of recorded music are not prone to reach sign artists whose repertoire is included in the package for easily a common understanding on the terms of coor­ a period of 10 years; and (vii) the behavioural dination, given their complexities. This assessment commitments included in the commitments of 27 July remains unchanged considering the change brought 2012 and which were considered too complex and about by the proposed transaction. vague were replaced by a simple commitment not to include most favoured nation (‘MFN’) clauses in Universal's favour in any agreement with any legal digital service C. Vertical and conglomerate issues provider to the extent such an agreement applies to the EEA. This commitment was given for a period of 10 years. (57) The Commission concluded that the transaction does not At the Commission's request, the notifying party also raise any concerns of a non-horizontal nature related to removed the commitment to terminate two licensing/dis­ Universal's and EMI's activities in digital retail distribution, tribution agreements with third parties. 1.8.2013 EN Official Journal of the European Union C 220/21

(62) The commitments of 25 August 2012 therefore consist of: that Universal would acquire an additional market share of (i) the divestment of the worldwide rights for certain EMI around (0-5) % and therefore increase its EEA-wide market and Universal assets consisting of both Anglo and local share from (30-40) % to (30-40) %. repertoire; (ii) the termination of one licensing/distribution agreement; and (iii) the behavioural commitment not to include MFN clauses in the merged entity's future contracts with digital services. (67) In terms of market share on a national level, the divestment effectively reduces the increment brought about by the addition of EMI to Universal in every (63) The proposed commitment package includes the dives­ Member State as well as Iceland and Norway. The titure of the following legal entities/assets: package contains significant Anglo repertoire which cuts across all Member States as well as Iceland and Norway. In addition, the local repertoire being divested in Belgium, the (a) EMI Records Limited (‘EMIRL’): this includes: (i) all Czech Republic, Denmark, France, Norway, Poland, artists signed to EMIRL (including in particular the Portugal, Spain and Sweden further reduces the merged label ), with the exception of Virgin- entity's post-transaction market shares to levels that no branded artists and the Beatles which are the subject longer clearly indicate a significant increase in the of a reverse carve-out; (ii) the EMI Classics and Virgin market power that Universal already has today. Classics-branded artists signed to this legal entity; and (iii) the Pink Floyd catalogue; (68) In addition to the divestment of recorded music assets, the notifying party committed to terminate its distribution (b) EMI labels: Limited (excluding the agreement with the third party record company Ministry Robbie Williams catalogue), Ensign Records Limited of Sound and not to enter into any licence/distribution and Mute Records Limited; agreement with Ministry of Sound in the EEA for a period of 10 years from the adoption of the Decision.

(c) the following local EMI and Universal entities: EMI Belgium, EMI Czech Republic, EMI Denmark, EMI France, EMI Norway, EMI Poland, EMI Portugal, EMI (69) Finally, the notifying party committed for 10 years to Spain and EMI Sweden and Universal Greece; refrain from including any clauses in Universal's contracts with digital customers to the extent they apply to the EEA which would require those customers to (d) EMI's 50 % stake in the ‘NOW’ compilation business; guarantee to Universal commercial terms that are better, and equivalent to or at least as good as those agreed with another recorded music company (the MFN commitment).

(e) Universal label businesses: Sanctuary Records Group Limited, Co-op Music Limited, King Island Roxystar Recordings AB and MPS Records, as well as Universal's Assessment of the commitments of 25 August 2012 40 % share in Jazzland Recordings (a joint venture). (70) The Commission's assessment of the commitments is based on all available evidence, including the results of the market test and detailed information provided by the (64) The total size of the final commitments (which include notifying party as regards the contents of the remedies mostly EMI assets and some Universal assets) represents package, in particular details relating to the artists around two thirds of EMI's EEA business. contracts (future delivery obligations, length of contracts, remaining retention period on catalogues and change of control/assignment clauses). The Commission carried out (65) In terms of the market share impact of the final commit­ its analysis against the criteria for acceptable remedies in ments, the Commission reiterated that market shares are merger cases contained in the notice on remedies but a preliminary indication of market power and are not acceptable under Council Regulation (EC) No 139/2004 in themselves determinative of whether or not a trans­ and under Commission Regulation (EC) No 802/2004 ( 1 ). action results in a significant impediment to effective competition. To this end, it is not necessary to identify any specific market share level under which the merged entity must remain in order for the significant impediment (71) The Commission concluded that the final commitments to effective competition to be removed. submitted by the notifying party are of a scale and nature such as to decrease Universal's market power on a sustainable basis so that no significant impediment to (66) That being said, the Commission notes that post effective competition arises as a result of the proposed divestment, the increment to the merged entity's overall transaction. This is because the assets included in the market share (including both physical and digital) at the package represent a substantial portion of the overlap, EEA level would be significantly reduced: the divestment are composed of an adequate mix between owned assets, package represents a market share of about (5-10) % on the market for the wholesale of digital music, which means ( 1 ) OJ C 267, 22.10.2008, p. 1. C 220/22 EN Official Journal of the European Union 1.8.2013

distribution/licensing deals and compilations and are of etise’ their repertoire and sign and retain artists, which good quality (i.e. likely to continue to generate future would ultimately harm consumers in terms of prices and revenues). Furthermore, the fact that two thirds of the choice, would also be addressed by the commitments. package will be sold to a single purchaser that already has industry experience will strengthen the counter- balancing effects of the divestment. Artists will have a V. CONCLUSION strengthened competitor to go to and Universal's ability to extract more onerous commercial conditions from (74) For the reasons mentioned above, the Decision concludes digital service providers will not increase. that the proposed concentration will not significantly impede effective competition in the internal market or in a substantial part of it. (72) The Commission therefore concluded that the final commitments of 25 August 2012 remove the significant impediment to effective competition. (75) Consequently, the concentration should be declared compatible with the internal market and the functioning (73) Any concerns arising from the potential marginalisation of of the EEA Agreement, in accordance with Article 2(2) and competitors (in both the digital and physical space) as a Article 8(2) of the Merger Regulation and Article 57 of the result of a significant reduction in their ability to ‘mon­ EEA Agreement.