UMG’s Downtown Deal: European Commission Launches ‘In-Depth’ Second Phase of Investigation

The European Union’s antitrust regulator said on Monday (July 21) that it opened an “in-depth,” second phase of its investigation into whether Universal Music Group’s plan to acquire Downtown Music Holdings would hurt competition for music distribution and artist and label services there.

The commission’s preliminary review of UMG’s $775 million deal with Downtown concluded that the merger could give UMG commercially sensitive data about its rival record labels and “remove Downtown as an important competitive force in the market for [artist and label] services.” The regulator, which has the authority to review the transaction because UMG is headquartered in the Netherlands, now has until Nov. 26 to issue a decision.

“By acquiring Downtown, UMG would purchase a large provider of services for labels that compete with UMG and for artists. Opening an in-depth investigation will allow us to assess more carefully whether this acquisition would have a negative impact on artists, labels and, ultimately, European consumers,” Valdis Dombrovskis, the group’s commissioner for economy and productivity, implementation and simplification, said in a statement.

If the deal is approved, the world’s largest music company would buy one of the largest independent music services and distribution companies. That prospect has sparked an outcry from indie music trade companies and organizations.

A UMG spokesperson did not immediately respond to a request for comment, but the company has previously said it is waiting for the European Commission’s final decision and is confident the merger would enhance its offering to artists, labels and other independent music companies.

Founded in 2007 in New York, Downtown Music Holdings is the parent company of the direct-to-creator distributor CD Baby and the direct-to-business technology and distribution platform FUGA, as well as SongTrust and several other companies.

Europe’s independent music trade organization IMPALA, which represents around 6,000 indie music companies and associations, welcomed the second phase of the European Commission’s investigation and said it hopes the regulator will block the deal, according to a press release. The group argues that the tie-up between UMG’s Virgin Group and Downtown poses a serious threat to competition in part because it follows UMG gaining a majority ownership stake in the indie label group [PIAS] in 2024 and buying the Netherlands-based indie group called 8ball earlier this year.

“Our concern is simply that there is a point at which big becomes too big,” IMPALA said in a statement. “This acquisition must be stopped outright in order to avoid one company leveraging its market power to shape the music ecosystem to its advantage.”

The European Commission said its concerns center on Downtown’s role in processing “commercially sensitive data of third-party record labels,” which it says UMG could use to advantage its recorded music division while harming rivals. It also noted that UMG is already “the leader in the market for the wholesale distribution of recorded music in the EEA.”