OFT closed case: Completed acquisition by Centenary Music Holdings Limited of V2 Music Group Limited.
Affected market: Music recording
Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.
The OFT’s decision on reference under section 22(1) given on 5 November 2007. Full text of decision published on 13 November 2007.
Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.
Centenary Music Holdings Limited (Centenary) is wholly owned by Universal Music Group (Universal) which is in turn wholly owned by Vivendi SA (Vivendi). Universal is an international media company whose main activities comprise the production and distribution of recorded music and music publishing.
V2 Music Group Limited (V2) is an international music group operating in the field of recorded music. Physical and digital distribution of its recorded music is undertaken by Universal. V2 also provides services through its division ‘CO-OP’ to smaller independents and single artist labels. V2’s UK turnover for the year ended 31 March 2006 was £9 million.
On 26 September 2007, Centenary acquired the entire issued share capital of V2. The transaction was notified on 5 September 2007. The administrative deadline expires on 5 November 2007 and the statutory deadline expires on 25 January 2008.
As a result of this transaction, Centenary and V2 have ceased to be distinct. The transaction qualifies as a relevant merger situation on the share of supply test under Section 23 (3) of the Enterprise Act 2002 (the Act) as the parties’ combined share of supply in the UK for recorded music exceeds the 25 per cent threshold.
The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.
The transaction was notified to the National Competition Authorities in Austria and Germany and has been approved in each jurisdiction.
THIRD PARTY VIEWS
From a large sample of third parties contacted by the OFT, the majority even though pointing to Universal’s strong presence in UK recorded music, considers the increments resulting from the present transaction as being very modest and is therefore unconcerned.
However, a few third parties (four) express concerns relating primarily to Universal’s existing size and the current structure of the music recording market. Two in particular points to Universal’s strategy of ‘creeping acquisition’. These concerns are addressed above and do not give rise to any credible theory of harm.
The parties overlap in the supply of music recording in the UK. Their post-merger shares, depending on the segment considered, range from [20-30] per cent to [30-40] per cent. However, all increments resulting from the transaction amount to less than 1.5 per cent.
Post-merger, other majors and independents continue to operate as a strong competitive constraint to the merged entity. With the exception of a few third party concerns, which do not lead to any credible theory of harm, third parties generally agree that the increment to Universal’s share of supply is very low and that it will have a negligible (if any) effect on competition. Finally, on the basis of the available evidence, the OFT does not believe that the transaction will give rise to any portfolio effects.
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the UK.
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.