Sony-BMG’s Merger-Go-Round

The casual observer may be getting a little confused, as no sooner have the indie music companies asked for an investigation into the European Commission’s decision to approve the Sony-BMG merger for a second time than the record companies are back in court appealing The European Court of Justice’s decision to annul the first approval.

Indies trade organisation IMPALA is calling for the annulment to be upheld as its objections to the second approval are very much based on the European Court’s decision to overthrow the first one.

The European Court of Justice heard the Sony-BMG appeal November 6, while IMPALA was in court to say the record companies’ action is "unfounded and unjustifiable."

It says Sony and BMG are trying to reopen the facts, which the court rules do not allow as appeals can only be made on points of law.

IMPALA says it’s also concerned that the effect of the parties appeal would be to rewrite merger control and lower standards to benefit merging parties.

The EC’s second approval of the merger places a question mark over the legal interest of Sony and Bertelsmann in continuing their appeal. This is because the second EC approval issued in October gives the parties what they sought and therefore renders the litigation without purpose.

The judges also raised the issue of legal interest at the hearing.

The case was heard by the Grand Chamber (full court with 12 judges), underscoring the importance of the issues at stake. The Advocate General, Juliane Kokott, is expected to deliver an opinion December 13.

"The initial decision by the European Court set a number of precedents and was a huge encouragement to the independent community that their arguments were being heard and accepted at the highest level. We believe it should be upheld in the interests of Europe’s consumers, music fans, and entrepreneurs," said IMPALA chairman Martin Mills, who’s also head of the U.K.’s Beggars Group.

Patrick Zelnik, IMPALA president and president of Naïve, said, "We have asked the Commission to undertake a fundamental rethink on its approach to concentration in the music market.

"Market recovery is possible if the whole sector works together with the Commission – as IMPALA has already proposed."