Independents decry approval of Sony-BMG merger

Independent music companies reacted angrily yesterday to the European commission's decision to approve the merger of Sony Music and BMG despite rivals' complaints that it has stifled competition.

The commission's ruling on the joint venture was its second approval after its initial 2004 clearance was overturned by Europe's second-highest court.

In a move that sent shockwaves through the music industry, the court of first instance last year upheld an appeal by the independent record labels association Impala. The lobby group argued at the time that the commission had put 80% of the worldwide music market into the hands of four media conglomerates.

Brussels launched a fresh inquiry this year into the ramifications of the Sony-BMG tie-up, which covers artists such as Céline Dion and Bruce Springsteen.

The new inquiry could have ended in a decision to unravel the joint venture. The commission said, however, that it had not found that having fewer big music companies had resulted in them coordinating to raise prices or restrict production.

The decision comes against a backdrop of sharp declines in global music sales and rampant piracy. Neelie Kroes, EU competition commissioner, said: "This investigation represents one of the most thorough analyses of complex information ever undertaken by the commission in a merger procedure. It clearly shows that the merger would not raise competition concerns in any of the affected markets."

Impala, which represents 3,500 members, described as "bizarre" the decision to approve the merger without imposing any conditions on Sony-BMG. It accused the commission of disregarding its evidence of anti-competitive behaviour and of failing to consider the effects of the merger on consumer choice.

Impala's president, Patrick Zelnik, said: "The European commission has ignored the simple fact that four companies control 95% of the music most citizens hear on the radio throughout the world."

The independent labels now plan to ask the European ombudsman to investigate potential maladministration. Impala said it also had the option of appealing.