1.8.2013   

EN

Official Journal of the European Union

C 220/1

1.8.2013   

EN

Official Journal of the European Union

C 220/4

1.8.2013   

EN

Official Journal of the European Union

C 220/5

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in the merger section of the Competition website of the Commission (http://ec.europa.eu/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

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in electronic form on the EUR-Lex website (http://eur-lex.europa.eu/en/index.htm) under document number 32013M6975. EUR-Lex is the on-line access to the European law.

1.8.2013   

EN

Official Journal of the European Union

C 220/6

1.8.2013   

EN

Official Journal of the European Union

C 220/7

1.8.2013   

EN

Official Journal of the European Union

C 220/8

1.

The Advisory Committee agrees with the Commission that the notified transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

2.

The Advisory Committee agrees with the Commission that the notified transaction has a Union dimension pursuant to Article 1 of the Merger Regulation.

3.

The Advisory Committee agrees with the Commission’s definitions of the relevant product markets as stated in the draft decision.

In particular, concerning the product market definition, The Advisory Committee agrees that the impact of the notified transaction must be assessed on the following markets:

4.

The Advisory Committee agrees with the Commission’s definitions of the relevant geographic markets as stated in the draft decision.

In particular, concerning the geographic market definition, The Advisory Committee agrees that the impact of the notified transaction must be assessed on the following markets:

5.

The Advisory Committee agrees with the Commission's assessment that the notified transaction is not likely to give rise to coordinated effects that would significantly impede effective competition on the market for the wholesaling of physical music at the national level and on the market for the wholesaling of digital music at the EEA level, as well as at the national level.

6.

The Advisory Committee agrees with the Commission's assessment that the notified transaction is not likely to significantly impede effective competition due to anti-competitive vertical and/or conglomerate effects, which may result in the foreclosure of the merged entity's customers and/or competitors in the relevant markets identified in the draft decision.

7.

The Advisory Committee agrees with the Commission's assessment that the notified transaction would likely lead to a significant impediment to effective competition in the following markets:

8.

The Advisory Committee agrees with the Commission's analysis of (i) piracy (ii) buyer power and (iii) entry and the conclusion that they are not of a nature to counteract the significant impediment to effective competition likely resulting from the notified transaction.

9.

The Advisory Committee agrees with the Commission that the final commitments offered by the Notifying Party on 25 August 2012 (the ‘final commitments’) fully address the competition concerns identified by the Commission in the market for the wholesale of digital recorded music both at the EEA level and at the national level.

A minority abstains.

10.

The Advisory Committee agrees with the Commission's conclusion that, subject to the full compliance with the final commitments, the notified transaction is not likely to significantly impede effective competition in the internal market or in a substantial part of it.

A minority abstains.

11.

The Advisory Committee agrees with the Commission that the notified transaction must therefore be declared compatible with the internal market and the functioning of the EEA Agreement in accordance with Articles 2(2) and 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

A minority abstains.

1.8.2013   

EN

Official Journal of the European Union

C 220/10

(1)

On 17 February 2012, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation (2) by which Universal Music Holdings Limited (‘Universal’) would acquire control, within the meaning of Article 3(1)(b) of the Merger Regulation, of the recorded music assets of EMI Group Global Limited (‘EMI’), by way of a purchase of shares (Universal and EMI are referred to as ‘the parties’).

(2)

On 23 March 2012, the Commission initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation. A statement of objections (‘SO’) was subsequently sent to Universal on 19 June 2012 for which a two-week deadline for the reply was granted, which DG Competition extended by two days upon the request of Universal.

(3)

In the SO, the Commission’s preliminary findings indicated that the notified concentration would significantly impede effective competition in the market for the wholesale of digital music at the EEA level as well as in 25 Member States (3) and the market for the wholesale of physical recorded music in 22 Member States (4).

(4)

Universal submitted its reply to the SO within the deadline without requesting an oral hearing.

(5)

The main procedural feature of this case is that several access to file issues arose with regard to the use of a data room.

(6)

Already prior to the issuance of the SO, Universal requested access to third party data collected by DG Competition and used in analyses of the Chief Economist Team’s (‘CET’) analyses. Universal argued that such access was necessary in order not to prejudice its rights of defence and to identify possibilities for commitments.

(7)

DG Competition rejected this request because the requested information was part of the file to which access would be granted only after the notification of the SO in line with Article 17(1) of Implementing Regulation (5). With regard to Universal’s commitments argument, DG Competition replied that any data work undertaken by the Commission did not affect Universal’s ability to submit suitable remedies prior to any SO being issued.

(8)

Universal subsequently asked me, before the SO was sent, to review the data room rules DG Competition had drawn up for this proceeding (‘the rules’). Universal submitted that its rights of defence would be violated mainly for the following three arguments. First, the intended scope of the disclosure was too narrow, as it would not allow Universal to access the raw data and the relevant codes used to build the final datasets on which the CET’s analysis was run. Such information was said to be necessary, however, in order to allow its external economic advisers to verify the soundness of the CET’s analysis and the reliability of the data. Second, it was claimed that specific provisions in the rules restricting the use of the data would prevent Universal’s external economic advisers properly to verify and test the CET’s analysis. Lastly, Universal claimed that it was unnecessary, disproportionate and unreasonable to anonymise the CET data. It was argued that the anonymisation would prevent Universal’s external economic advisers from understanding the specific factual context in which the data was generated.

(9)

DG Competition justified these restrictions on the basis of the particularly commercially sensitive nature of the data from the customers and competitors in application of the Tetra/Laval case-law (6).

(10)

Having regard to the need for speed in merger cases, I reviewed the rules by applying the following principles. An addressee of the SO must be given full access to all adverse evidence. If the evidence is confidential, access must be given to the extent that it is indispensable for an addressee’s rights of defence. In terms of quantitative evidence, which was the subject matter of Universal’s requests, this means that an addressee must normally be able to carry out three processes. First, the addressee must be in a position to replicate the CET analysis (i.e. access must be given to the data and methodology used). Second, the addressee must be able to test the Commission’s analysis (i.e. access must be given to discarded data, alternative variables and information explaining outliers, etc.). Finally, the addressee must be allowed to verify the reliability of the data, at least, on the basis of random checks. On this latter point, if the addressee’s external advisers can point out concrete and specific mistakes arising from the random checks, further access could be granted depending on the scope of mistakes and the scope of the data that is actually contained in the file. In this context, and in view of the often confidential nature of the data, it would seem justifiable to impose restrictions, particularly in requiring (a) the addressee to explain to the Commission what its external advisers intend to do and (b) to carry out such computations under supervision of Commission officials.

(11)

I replied to Universal by letter of 18 June 2012 that, after my discussions with DG Competition, the rules had been amended to address the above principles. Regarding the scope of disclosure, the rules were clarified to confirm that all raw data and codes would be included in the data room. With respect to the restrictions on the use of the data, these were relaxed in the rules in order to allow Universal’s external economic advisers to conduct the tests and verifications of the CET’s analysis indicated in the letter. On the anonymisation of the data, I emphasised that the Commission considered the data to constitute particularly sensitive business secrets, the disclosure of which would undermine the competitive position of certain data providers. In view of the additional access that the amended rules now foresaw, and the technical explanations given to me by DG Competition, it seemed to me that Universal’s external economic advisers were in a position to carry out the computations that they had sufficiently specified in their request and it was therefore not indispensable for the anonymisation to be lifted. Lastly, I referred Universal to the possibility of making further reasoned submissions to me in the event that Universal’s external economic advisers were to come across specific concrete examples of unexplainable data patterns and had reason to believe that further access was still necessary for the proper exercise of its right to be heard.

(12)

By letter of 19 June 2012, Universal asked me to amend the rules further, as they still contained limitations on the use of the CET data which impaired Universal’s rights of defence. In particular, Universal claimed, by reference to specific computations, that its external economic advisers would be prevented from verifying the reliability and accuracy of certain data and calculations. In response to Universal’s additional claims which had been sufficiently specified, the rules were further amended to provide Universal’s external economic advisers with more possibilities to carry out robustness checks and undertake further computations.

(13)

Universal was granted access to the file on 20 June 2012.

(14)

By means of a reasoned request dated 22 June 2012, Universal formally reiterated, first, its earlier claim to be granted full access to adverse quantitative analysis and renewed its three complaints with regard to the limitation of the scope of access, the restriction of the use of the CET data and the anonymisation. Second, Universal requested that its external legal advisers be granted access to the data room. Universal claimed that such access was necessary to ensure the proper exercise of its rights of defence as the external legal advisers needed: (i) to be able to review the information contained in the data room and any confidential analysis carried out by the external economic advisers; (ii) to see the confidential content of the data room report of which only a non-confidential version would be communicated to Universal, and (iii) to provide advice on the compliance of the data room process with the rules.

(15)

I rejected both parts of Universal’s request by a decision adopted on 29 June 2012 under Article 7 of the terms of reference. On the basis of the technical information I had received from DG Competition, the rules allowed Universal’s external economic consultants, in regard of those computations which had been sufficiently specified, to carry out, in certain instances, any computation they wanted. In other cases, the external economic advisers could propose computations to be carried out and discuss such proposals with the Commission. Finally, certain computations could not be carried out because the case file did not contain the necessary data. In respect of the requested disclosure of anonymised data, Universal had not provided concrete and specific evidence that it was indispensable to the exercise of its rights of defence.

(16)

I also rejected the second part of Universal's request, i.e. to admit its external legal advisers to the data room. Such access would go beyond the very purpose of the data room which was to allow the parties’ external economic advisers to access the quantitative data gathered by the Commission. To the extent that the data room contains business secrets of third parties the procedure is an exception to the Commission’s general obligation not to disclose confidential information. As this procedure is an exception, strict safeguards are necessary to avoid even unintentional disclosure of the data. I found that Universal’s rights of defence did not require direct access for its external legal advisers to the data room, since it is sufficient for the external lawyers in the three situations pointed out by Universal to be able to communicate with the external economic advisers outside of the data room.

(17)

On the day of the adoption of the rejection decision, having received an advance copy, Universal requested me to review my decision reiterating by and large its earlier arguments regarding the restrictions imposed on the external economic advisers and their inability to perform certain analyses. It also submitted again that its external legal advisers should be allowed direct access to the CET data set in unredacted form as this was necessary to ensure that Universal’s right to legal representation and advice was not severely restricted.

(18)

Having again carefully considered Universal’s arguments, I decided on 12 July 2012 to maintain my initial decision. First, contrary to Universal’s claim, the rules allowed Universal's external economic advisers to perform the requested analysis in the data room. The fact that the external economic advisers did not make use of it was no reason for me to review my earlier decision or the rules on this point. Second, while it was correct that a party to proceedings should have effective legal representation and advice as part of its rights of defence, this did not alter the need for demonstrating that access to confidential information was indispensable for the exercise of such rights.

(19)

However, in view of a potential misunderstanding or misinterpretation of the rules by the parties, I invited Universal to contact DG Competition to discuss any proposals for further regression analyses that Universal’s external economic advisers might wish to carry out. To that end, the data room was to be made available for this specific purpose. Moreover, DG Competition approached the data providers, on my behalf, with a view to obtaining consent to allow one of Universal’s external legal advisers to enter the data room, so that the external economic advisers could be assisted on the spot with the interpretation of the rules. Universal decided however not to make use of this exceptional access offer.

(20)

On 26 and 27 June 2012, Universal submitted that DG Competition had wrongfully refused its request for its external economic advisers to share the confidential version of one of their data room reports with Universal’s external legal advisers and (in redacted form) with Universal. The requested information concerned the parties’ royalty shares per platform offering digital recorded music to final consumers, which had been calculated by the external economic advisers on the basis of data contained in the data room. Universal claimed that by refusing to disclose the information in question, DG Competition would deny access to both adverse as well as supporting evidence, since, in Universal’s view, the information could be used to rebut the Commission’s preliminary view that IFPI (7) market shares were more reliable than market shares calculated by the parties. After discussions and meetings between Universal’s external legal and economic advisers, DG Competition and members of the Hearing Office, it was agreed that the following could be disclosed to Universal: (i) a number of exact royalty shares that were considered not to disclose confidential information; (ii) ranges for other more confidential share information and confirmation whether the royalty shares were below 40 %; and (iii) textual descriptions of all the royalty shares.

(21)

By decision of 4 July 2012, taken in accordance with Article 7 of the terms of reference, I rejected Universal’s request to access the confidential information contained in the external economic advisers’ data room report. As there was a real possibility that Universal, and to a certain degree also its external legal advisers, would be in a position to reverse-engineer certain sensitive information if it were given access to the remaining confidential royalty shares (i.e. those not falling under category (i) above), and given the additional access granted through (ii) and (iii) above, I concluded that further access was not indispensable to safeguard Universal’s rights of defence. Moreover, Universal’s advisers chose not to make use of the additional access granted under (iii) above. Universal’s rights were not infringed as its external legal advisers were able to use the information provided as supportive evidence or to rebut adverse evidence.

(22)

Pursuant to Article 16(1) of the Implementing Regulation, I accepted requests from Impala, Merlin BV, Warner Music Group, Sony Music, the Beggars Group Ltd., the UK collecting societies MCPS and PRS as well as the record companies Naïve and Because Music to be heard as interested third persons.

(23)

On 25 July 2012, the Commission sent to the parties a letter of facts setting out additional elements, namely further data on the relative market position of the majors, in support of the Commission’s objections in the final decision. The parties were given until 1 August 2012 to provide their written comments. In their reply of 1 August 2012, the parties submitted that the letter of facts had changed the theory of harm set out in the SO thereby ‘recasting the essential nature of the preliminary objections’ raised against them.

(24)

DG Competition responded to this letter on 3 August 2012 by noting that this new factual data supported the Commission’s preliminary finding in the SO that Universal was larger than any other major in a number of countries. DG Competition also pointed out that the letter of facts merely provided purely factual information in support of the existing theories of harm described in the SO and did not, as such, establish a new theory of harm based solely on the relative size of the majors. The parties were given the opportunity to provide further comments, but decided not to do so. Consequently, I consider this matter to be closed.

(25)

In order to address the competition concerns identified by the Commission in the SO, the parties submitted commitments on 27 July 2012 pursuant to Article 8(2) of the Merger Regulation. The market test of this set of commitments was launched on the same day in order to gather the views of relevant market participants on the effectiveness of the commitments and their ability to restore effective competition in the markets where competition concerns were identified.

(26)

In light of the results of the market test, the parties submitted a revised set of commitments on 13 August 2012 which was subsequently amended on 17 August 2012. Final commitments were submitted on 25 August 2012. The Commission concluded that the commitments proposed by the parties on 25 August 2012 sufficiently addressed all the remaining concerns regarding the compatibility of the proposed transaction with the internal market.

(27)

Pursuant to Article 16 of the terms of reference, I have examined whether the draft decision deals only with objections in respect of which the parties have been afforded the opportunity of making known their views, and I have come to a positive conclusion.

(28)

Overall, I conclude that all participants in the proceedings have been able to effectively exercise their procedural rights in this case.

1.8.2013   

EN

Official Journal of the European Union

C 220/15

(1)

Universal Music Holdings Limited (‘UMHL’) is a wholly-owned subsidiary of Universal International Music BV, 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 artists (so-called ‘artists & repertoire’ or ‘A&R’) and in the wholesale of recorded music. It also has activities in other fields, such as online music retail, music publishing, artist management, merchandising, event management, and event venue services. Universal is ultimately owned by Vivendi SA.

(2)

Vivendi SA (‘Vivendi’, France) is Universal's ultimate parent 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.

(3)

EMI Group Global Limited (‘EMI Group’, UK) is active in the discovery, development and promotion of recording 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 merchandising.

(4)

On 17 February 2012, the Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation, by which the undertaking UMHL acquires, by way of purchase of shares, control within the meaning of Article 3(1)(b) of the Merger Regulation of the recorded music assets of EMI Group.

(5)

On 11 November 2011, Vivendi and Universal, on the one hand, and EMI Group, on the other hand, entered into a Share Purchase Agreement pursuant to which Universal would acquire EMI Group's activities in A&R and in the wholesale of recorded music, as well as EMI Group's retail recorded music activities, certain limited 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 referred to as ‘EMI’.

(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 has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

(7)

After examination of the notification, the Commission adopted a decision on 23 March 2012, concluding that the operation falls within the scope of the Merger Regulation and raises serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement. The Commission therefore decided to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

(8)

On 19 June 2012, a statement of objections was addressed to the notifying party pursuant to Article 18 of the Merger Regulation. Universal replied to the statement of objections on 6 July 2012.

(9)

In order to address the competition concerns identified in the statement of objections, the notifying party submitted commitments on 27 July 2012. The time limit for the adoption of a decision pursuant to Article 8 of the 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 13 August 2012, which were subsequently amended on 25 August 2012.

(10)

The centre of gravity of the proposed transaction is the recorded music sector, as this comprises the core of the activities of each of Universal and EMI. The recorded music sector in the EEA today is characterised by the presence of four worldwide record companies (Universal, Sony, EMI and Warner; together the so-called ‘majors’) and a large number of significantly smaller record companies (the so-called ‘independents’ or ‘indies’).

(11)

The recorded music industry as a whole has experienced a significant decrease in music sales in the last decade both globally and in the EEA as a result of the availability of music via legal digital services as well as digital piracy. Despite this decline hitting the physical sales most severely, sales of physical music still account for around 80 % of total music sales in the EEA. Sales of digital music are expected to significantly increase over the next years and to reach a tipping point where they will exceed sales of physical music.

(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, an activity known as A&R. Success or failure in A&R is key to success in the markets for recorded music.

(13)

The next level of the recorded music value chain comprises the sale or licensing by record companies of their repertoire to wholesalers and retailers, as well as to certain categories of end users (namely TV and radio broadcasters).

(14)

Recorded music includes a wide variety of physical products (such as CDs — singles, albums/compilations — and DVDs — audio and video) and digital products, sold by the record companies to retailers which, in turn, resell them to end users. In addition, record companies can also license their repertoire to audio or video digital streaming service providers.

(15)

There are various categories of physical retailers (in addition to wholesalers, which act as intermediaries between record companies and retailers), of which the main types are hypermarkets/supermarkets (so-called ‘mass merchants’), e-tailers and specialist retailers.

(16)

Regarding digital retail channels, the principal means of online music dissemination are through downloading 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.

(17)

Streaming technology has also allowed for new platforms and business models to develop over the last few years. Internet service providers and mobile network operators increasingly offer music streaming services, either by developing their own branded services (often bundled with telecom subscriptions) or via partnerships with existing streaming platforms. Some streaming services also have partnerships with social networking sites. Finally, cloud music services that offer users the ability to store their acquired music on remote servers have emerged.

(18)

In its previous decisions relating to the recorded music sector (2), the Commission never defined an upstream market for A&R. It is, however, the case that A&R services are provided to different market players (artists) 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.

(19)

The Commission concluded that it is not necessary to take a view as to whether A&R activities should be considered 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 positive influence over its market position on the other side of the market (wholesale of recorded music) and conversely. The strength of record companies in A&R was taken into account by the Commission in the 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.

(20)

The Commission in the past identified separate product markets for the wholesale of physical music and of digital music (3). Within the digital music market, the Commission left open the question whether there are separate product markets for digital music delivered for online applications and mobile applications, or for downloading and streaming. The Commission also did not identify separate product markets based on genre (e.g., pop, classical, jazz, etc.) or for single artist albums and compilations. The market investigation in this case has not revealed any new material element which would justify departing from these precedents.

(21)

The Commission concluded that audio music and video music belong to the same product market for the wholesale of recorded music (whether physical or digital).

(22)

The Commission concluded that a separate product market should be identified for the wholesale of recorded music to end users licensing recorded music from producers’ music licensing companies. As regards retailing of recorded music, the Commission did not consider it necessary to take a view on the definition of a relevant product market.

(23)

In line with its precedents, the Commission concluded that manufacturing and logistics activities fall outside the scope 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 event management services). Finally, the Commission concluded that online publishing rights should be considered as a separate product market.

(24)

The Commission concluded that the market for the wholesale of physical recorded music is national in scope.

(25)

As regards the wholesale of digital recorded music, the Commission did not consider it necessary to take a view on the exact geographic market definition given that the transaction raised concerns on both an EEA-wide and national levels.

(26)

The Commission did not consider it necessary to take a view on the definition of a relevant geographic market regarding A&R, retail of recorded music, ancillary services and music publishing.

(27)

The notifying party claimed that there should be a single market encompassing the wholesale of recorded music in both physical and digital formats, comprising both legitimate and unauthorised supplies of music (that is, to say piracy). In support of that claim, the notifying party argued that there is strong evidence of substitution by consumers between these music formats and sources, including between pirated and authorised music.

(28)

The Commission has never considered in its past decisions that legal and illegal music belong to the same product market. However, the market investigation in the Sony/BMG case (4) revealed that piracy exerts a competitive constraint on record companies in certain territories.

(29)

The Commission concluded that assessing the degree of 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 music should be considered as part of the market for the wholesaling of recorded music. This reflects the fact that, regardless of whether legal and illegal music are to be considered as substitutes from the point of view of end users, they do not appear to be substitutes from the point of view of the record companies' direct customers — physical and digital music retailers. By the same token, pirate services do not compete with record companies. They are not active in A&R and they are not active in the wholesale supply of recorded music to physical and digital customers.

(30)

Thus, the Commission concluded that it is not appropriate from the demand or from the supply side, to consider legal and illegal music as part of the same relevant 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 out-of-market constraint on record companies' pricing and output decisions in the context of the competitive assessment of the proposed transaction.

(31)

The Commission's theory of harm in this case is not predicated on a particular market share threshold being exceeded. Indeed, the Commission makes clear that market shares are but a first indication of market power 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 control of concentrations between undertakings (5) (‘Horizontal Merger Guidelines’), a significant impediment to effective competition is likely to arise in cases where the merged entity would have an appreciably larger market share than the next competitor post merger. It is therefore the indication that market shares give of the overall post-merger strength of the merged entity and its relative position to its competitors after the merger that drives the Commission's competitive assessment in this case.

(32)

The analytical framework is all the more relevant in this case given that no industry source gives a completely reliable view of the merged entity's position post merger. Whilst in previous decisions relating to the recorded music industry the Commission used IFPI data, in this case the notifying party strongly contested the use of IFPI data and argued it is unreliable, providing alternative ‘market share’ data based on iTunes and Spotify sales as well as retail sales data gathered by GfK and the OCC.

(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 hypothetical market consisting only of the four majors in order to assess Universal's and EMI's market position vis-à-vis the other majors (the independents, albeit together holding a not unsubstantial market position, cannot be viewed as a single entity). Finally, the Commission also took into consideration what chart data and radio airplay data showed, although this data cannot be equated to market shares.

(34)

Following the analysis of all the data sources, the Commission concluded that the proposed transaction would result in the creation of a dominant ‘super-major’ twice (or even three or more times, in certain Member States) the size of its next largest competitor at the EEA level and in several Member States as well as Iceland and Norway. In more detail, in respect of physical recorded music, the merged entity would be more than twice the size of the next largest competitor in at least eight Member States — Cyprus, the Czech Republic, Ireland, Luxembourg, the Netherlands, Romania, Sweden and the United Kingdom, as well as Iceland, three or more times larger than the next largest competitor in at least five further Member States — Belgium, France, Greece, Poland and Slovakia as well as Norway, and more than 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 would be twice or more the size of the next largest competitor at the EEA level and in at least 16 Member States — Austria, Belgium, Bulgaria, Estonia, France, Greece, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Sweden and the United Kingdom as well as Iceland and Norway.

(35)

In conclusion, the merged entity would have been the undisputed market leader by a distance post merger. From a structural point of view and on the face of market shares and the chart and radio airplay data, the existing competitive dynamics, which are based on a certain balance of power between, at least, the majors (despite Universal's already existing market leadership), would be completely altered by the proposed transaction in favour of the merged entity.

(36)

The Commission concluded that EMI is one of the four majors currently active in the recorded music sector worldwide, with a significant artist roster and music repertoire comprising a formidable back catalogue and strong new releases. EMI is also likely to be Universal's closest competitor in relation to at least classical music. The proposed transaction therefore would result to the elimination of an important competitive force from the relevant markets.

(37)

The Commission concluded that post transaction, the merged entity's repertoire will (continue to) be ‘must have’ and customers will therefore likely have limited (if any) ability to switch supplier and the merged entity's ability to exploit customers will likely significantly increase.

(38)

The Commission's investigation showed that Universal already before the proposed transaction has the ability and incentive to obtain licensing terms and conditions from digital customers that are more favourable to Universal as compared to those obtained by its competitors. These conclusions are based on three sources of evidence: (i) the comparison of the respective agreements of Universal and EMI with online platforms; (ii) evidence from the Commission's market investigation; and (iii) evidence from the merging parties. The evidence from each of these sources is further corroborated by the quantitative analysis undertaken by the Commission.

(39)

First, the Commission conducted a review of the commercial agreements of each of Universal and EMI with a selection of key digital customers, focusing on key commercial terms (including remuneration, the level of advance payments that digital customers need to make, commitments in relation to promotion and advertising 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 particularly marked for smaller platforms (download and streaming).

(40)

The Commission concluded that the differences in the contractual terms that Universal, which is already the largest recorded music company in the EEA, and EMI currently obtain constitute an indication of the likely negative effects on competition of the proposed transaction. Indeed, the substantial increase in Universal's size post merger, would be likely to increase Universal's bargaining position further, thus potentially resulting in not only the extension of Universal's current terms to EMI repertoire, but to an overall increase in the terms for the combined repertoire.

(41)

The Commission also carried out a quantitative analysis with a view to assessing whether, due to the increased size of the merged entity, the proposed transaction is likely to increase the merged entity's bargaining power vis-à-vis digital customers and, as a result, to lead to higher prices for these customers.

(42)

To this end, the Commission gathered digital music sales data from six major digital customers, as well as from six recorded music companies, across several Member States. The Commission then carried out a quantitative analysis of this data, essentially consisting of testing through statistic and econometric tools, whether there is a positive correlation between the size of a recorded music company and its ability to extract better terms from digital customers.

(43)

This analysis demonstrated that: (i) the rent that recorded 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 for relatively small online platforms, but is also present in platforms with significant bargaining power; and (iii) there is a positive relation between the size of a recorded music company's repertoire and the wholesale price it negotiates with online platforms.

(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 customers and other third parties have made throughout the Commission's investigation, as well as by certain Universal internal documents.

(45)

The Commission thus concluded that, due to its increased size in the wholesale of recorded music to digital customers, the merged entity would likely apply worse commercial conditions, including higher prices, to digital customers if the proposed transaction were to go ahead in the form originally notified.

(46)

The Commission considered that, in order to assess the degree of market power held by the merged entity vis-à-vis digital music retailers following the proposed transaction, it is also necessary to consider the merged entity's combined market position in the recorded music and in the music publishing sectors. The Commission considered control shares as an ‘aggravating factor’, which exacerbates the anti-competitive effects of the proposed transaction deriving from the combination of the merging parties' activities in the recorded music sector (which, in and by themselves, are sufficient to give rise to competition concerns). The control share analysis carried out by the Commission reinforced the Commission's findings that the proposed transaction would likely lead to a significant impediment to effective competition.

(47)

The Commission concluded that the proposed transaction would likely decrease innovation and consumer choice in two ways: (i) the proposed transaction would likely increase Universal's bargaining power and ability to impose onerous licensing terms on digital platforms, in particular small and emerging innovative music platforms. Such onerous licensing terms are likely to have a negative impact on the development of these customers and their ability to geographically expand to the various digital markets; and (ii) the merged entity would likely have an increased ability and incentive to influence the business model and characteristics of new digital music services and impose price increases on the retail market(s). As a result, the proposed transaction will also have a negative impact on cultural diversity. The Commission therefore concluded that the proposed transaction would likely decrease innovation and consumer choice.

(48)

The Commission concluded that these findings apply equally to the market for the wholesale of recorded music at the EEA level, as well as in each of Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom, as well as in Iceland and Norway.

(49)

The Commission also investigated whether the proposed transaction could give the merged entity the ability and the incentive to partially foreclose the merged entity's competitors from the markets for the wholesale of physical and digital music, as well as from A&R, to the detriment of competition and, ultimately, consumers, and cultural diversity.

(50)

Such foreclosure could potentially take place through the ability and incentive of Universal, due to its increased size post merger, to guarantee to its artists significantly better access to promotional opportunities (e.g., exposure at mass merchants, and digital customers, access to compilations and to radio airtime) than its competitors, including to an extent greater than its actual market share.

(51)

Increased access to all these promotional opportunities could result in the merged entity being able to sign the best artists, including at better conditions than other record companies, by offering them greater access to promotion. Competitors could find it increasingly difficult to compete with the merged entity to sign new artists which in turn could weaken these competitors' position vis-à-vis customers as their repertoire would become less attractive and, conversely, strengthen the merged entity's position giving rise to a self-perpetuating vicious circle.

(52)

Ultimately, however, the Commission concluded that there are not sufficient elements to prove to the requisite legal standard that the transaction would be likely to result in foreclosure of competitors. In any event, the commitments proposed by the notifying party, whilst solving the anti-competitive effects described above in relation to commercial terms with digital customers, would also solve any foreclosure concerns.

(53)

The Commission concluded that the existence of piracy would not deprive the merged entity of its ability and incentive to exercise its bargaining power vis-à-vis 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 behaviour today or post merger.

(54)

The Commission concluded that customers would not be in a position to exert buyer power as a countervailing factor to an increase of the merged entity's market power.

(55)

The Commission concluded that it is unlikely that a timely and sufficient entry by competitors in the relevant recorded music markets would counter the anti-competitive effects arising from the proposed transaction.

(56)

The Commission concluded that the markets for the wholesale of recorded music are not prone to reach easily a common understanding on the terms of coordination, given their complexities. This assessment remains unchanged considering the change brought about by the proposed transaction.

(57)

The Commission concluded that the transaction does not raise any concerns of a non-horizontal nature related to Universal's and EMI's activities in digital retail distribution, physical retail distribution, music video services, electronic communications, TV and film production and distribution, games and interactive entertainment and events ticketing services.

(58)

The Commission concluded that the proposed transaction, as notified, would lead to a significant impediment to 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 Member States, namely: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom, as well as Iceland and Norway.

(59)

The notifying party submitted formal commitments on 27 July 2012 which were put to the market test the same day. Overall, the market test showed that the commitments of 27 July 2012 presented a number of significant shortcomings which would have to be addressed.

(60)

The Commission informed the notifying party of the 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 the notifying party on the proposed commitments, the notifying party offered a new set of commitments on 13 August 2012 which were subsequently amended on 25 August 2012.

(61)

The main improvements to the package of 27 July 2012 consisted of: (i) additional owned content (Anglo repertoire as well as Danish and Spanish repertoire); (ii) the addition of EMI's share in a previously carved-out French entity Play.on; (iii) divestment of worldwide rights (as opposed to EEA-wide in the commitments of 27 July 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 should be a company in a group which is either currently or was previously active in the recorded music or music publishing industry; (vi) a commitment not to re-sign artists whose repertoire is included in the package for a period of 10 years; and (vii) the behavioural commitments included in the commitments of 27 July 2012 and which were considered too complex and 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 provider to the extent such an agreement applies to the EEA. This commitment was given for a period of 10 years. At the Commission's request, the notifying party also removed the commitment to terminate two licensing/distribution agreements with third parties.

(62)

The commitments of 25 August 2012 therefore consist of: (i) the divestment of the worldwide rights for certain EMI and Universal assets consisting of both Anglo and local 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.

(63)

The proposed commitment package includes the divestiture of the following legal entities/assets:

(64)

The total size of the final commitments (which include mostly EMI assets and some Universal assets) represents around two thirds of EMI's EEA business.

(65)

In terms of the market share impact of the final commitments, the Commission reiterated that market shares are but a preliminary indication of market power and are not in themselves determinative of whether or not a transaction 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 to effective competition to be removed.

(66)

That being said, the Commission notes that post divestment, the increment to the merged entity's overall market share (including both physical and digital) at the EEA level would be significantly reduced: the divestment package represents a market share of about (5-10) % on the market for the wholesale of digital music, which means that Universal would acquire an additional market share of around (0-5) % and therefore increase its EEA-wide market share from (30-40) % to (30-40) %.

(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 Member State as well as Iceland and Norway. The 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 Czech Republic, Denmark, France, Norway, Poland, Portugal, Spain and Sweden further reduces the merged entity's post-transaction market shares to levels that no longer clearly indicate a significant increase in the market power that Universal already has today.

(68)

In addition to the divestment of recorded music assets, the notifying party committed to terminate its distribution agreement with the third party record company Ministry of Sound and not to enter into any licence/distribution agreement with Ministry of Sound in the EEA for a period of 10 years from the adoption of the Decision.

(69)

Finally, the notifying party committed for 10 years to 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 guarantee to Universal commercial terms that are better, equivalent to or at least as good as those agreed with another recorded music company (the MFN commitment).

(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 notifying party as regards the contents of the remedies package, in particular details relating to the artists contracts (future delivery obligations, length of contracts, remaining retention period on catalogues and change of control/assignment clauses). The Commission carried out its analysis against the criteria for acceptable remedies in merger cases contained in the notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (6).

(71)

The Commission concluded that the final commitments 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 effective competition arises as a result of the proposed transaction. This is because the assets included in the package represent a substantial portion of the overlap, are composed of an adequate mix between owned assets, distribution/licensing deals and compilations and are of good quality (i.e. likely to continue to generate future revenues). Furthermore, the fact that two thirds of the 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 strengthened competitor to go to and Universal's ability to extract more onerous commercial conditions from digital service providers will not increase.

(72)

The Commission therefore concluded that the final commitments of 25 August 2012 remove the significant impediment to effective competition.

(73)

Any concerns arising from the potential marginalisation of competitors (in both the digital and physical space) as a result of a significant reduction in their ability to ‘monetise’ their repertoire and sign and retain artists, which would ultimately harm consumers in terms of prices and choice, would also be addressed by the commitments.

(74)

For the reasons mentioned above, the Decision concludes that the proposed concentration will not significantly impede effective competition in the internal market or in a substantial part of it.

(75)

Consequently, the concentration should be declared compatible with the internal market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

1.8.2013   

EN

Official Journal of the European Union

C 220/23

1.8.2013   

EN

Official Journal of the European Union

C 220/23

1.8.2013   

EN

Official Journal of the European Union

C 220/24

1.8.2013   

EN

Official Journal of the European Union

C 220/24

1.8.2013   

EN

Official Journal of the European Union

C 220/25

1.8.2013   

EN

Official Journal of the European Union

C 220/26

1.8.2013   

EN

Official Journal of the European Union

C 220/28

‘Days lost’,

‘Employment status of the victim’ and

‘Phase III variables on causes and circumstances’.

1.8.2013   

EN

Official Journal of the European Union

C 220/29

1.

On 25 July 2013, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (1) by which the undertaking RWA Raiffeisen Ware Austria AG (‘RWA’, Austria), jointly controlled by BayWa Aktiengesellschaft (‘BayWa’, Germany) and RWA Raiffeisen Ware Austria Handel und Vermögensverwaltung eGen, Vienna (‘RWA Genossenschaft’, Austria) acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of GENOL Gesellschaft m.b.H & Co KG (‘GENOL’, Austria) by way of contract of management.

2.

The business activities of the undertakings concerned are:

3.

On preliminary examination, the Commission finds that the notified transaction could fall within the scope of the EC Merger Regulation. However, the final decision on this point is reserved. Pursuant to the Commission Notice on a simplified procedure for treatment of certain concentrations under the EC Merger Regulation (2) it should be noted that this case is a candidate for treatment under the procedure set out in the Notice.

4.

The Commission invites interested third parties to submit their possible observations on the proposed operation to the Commission.

Observations must reach the Commission not later than 10 days following the date of this publication. Observations can be sent to the Commission by fax (+32 22964301), by email to COMP-MERGER-REGISTRY@ec.europa.eu or by post, under reference number COMP/M.6903 — RWA/GENOL, to the following address:

1.8.2013   

EN

Official Journal of the European Union

C 220/31

1.

On 25 July 2013, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (1) by which the undertaking SPIE SA (‘SPIE’, France) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Hochtief Service Solutions (‘HSS’, Germany) by way of purchase of shares.

2.

The business activities of the undertakings concerned are:

3.

On preliminary examination, the Commission finds that the notified transaction could fall within the scope of the EC Merger Regulation. However, the final decision on this point is reserved. Pursuant to the Commission Notice on a simplified procedure for treatment of certain concentrations under the EC Merger Regulation (2) it should be noted that this case is a candidate for treatment under the procedure set out in the Notice.

4.

The Commission invites interested third parties to submit their possible observations on the proposed operation to the Commission.

Observations must reach the Commission not later than 10 days following the date of this publication. Observations can be sent to the Commission by fax (+32 22964301), by email to COMP-MERGER-REGISTRY@ec.europa.eu or by post, under reference number COMP/M.6999 — SPIE/HSS, to the following address:

1.8.2013   

EN

Official Journal of the European Union

C 220/32

1.

On 25 July 2013, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (1) by which the undertakings Warburg Pincus & Co (‘Warburg Pincus’, United States), General Atlantic Company LLC (‘General Atlantic’, United States) and Banco Santander (‘Santander’, Spain) acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of Santander Asset Management (‘SAM’, Jersey) by way of purchase of shares.

2.

The business activities of the undertakings concerned are:

3.

On preliminary examination, the Commission finds that the notified transaction could fall within the scope of the EC Merger Regulation. However, the final decision on this point is reserved. Pursuant to the Commission Notice on a simplified procedure for treatment of certain concentrations under the EC Merger Regulation (2) it should be noted that this case is a candidate for treatment under the procedure set out in the Notice.

4.

The Commission invites interested third parties to submit their possible observations on the proposed operation to the Commission.

Observations must reach the Commission not later than 10 days following the date of this publication. Observations can be sent to the Commission by fax (+32 22964301), by email to COMP-MERGER-REGISTRY@ec.europa.eu or by post, under reference number COMP/M.6971 — Warburg Pincus/General Atlantic/Santander/Santander Asset Management, to the following address: