Sony-BMG Annulment Supported

The European Court of First Instance was right to annul the Sony-BMG merger, according to the European Union’s top legal expert.

The opinion of Juliane Kokott, the advocate general of the European Court of Justice (ECJ), is a huge boost for the independent sector.

It’s not a complete victory for Impala, the indie companies’ organization that has confounded media experts by mounting what appears to be another successful challenge to the merger, because the ECJ isn’t expected to hand down its official verdict until the new year.

Although it’s not unprecedented for the 12 judges to go against the advice of the advocate general, it is extremely rare.

"This is very encouraging. I trust the court will follow the advice of the advocate general and find in favour of thousands of small- and medium-sized record companies and artists across Europe," Impala president Patrick Zelnik said.

Kokott has taken the view that the appeal of Sony and Bertelsmann should be rejected in its entirety because the European Commission ignored overwhelming evidence that allowing the merger would be damaging to competition.

Apart from launching what now looks to be an unsuccessful appeal against the CFI’s 2006 ruling, the Japanese and German music companies have also submitted a merger application.

In October, the European Commission also passed it without remedies, although it’s likely Impala will appeal that decision after it looks at the wording.

It will be heartened by the fact that Kokott recommends Sony and Bertelsmann pay three-fourths of what it cost the indie organization to fight their appeal against the first annulment.

Having the appeal and the re-application running in parallel has caused a degree of understandable confusion. Impala’s latest press release greeting Kokott’s opinion was accompanied by a four-page explanation of the historical background.

While the arguments about Sony-BMG rumbled through the European courts, the independent music companies continued to remind politicians of the importance of small- and medium-sized cultural enterprises and the threat they face from growing conglomerates.

In the week before Kokott announced his opinion, some top EU officials and parliamentarians met Impala reps to discuss the Commission’s prioritization of SMEs.

The gathering took place December 5-6 and included a series of meetings in and around Impala’s Brussels HQ.

Key antitrust issues such as market access, tax credits and collective licensing were addressed, as well as the EU’s support for the sector.

The timing was critical as cultural and creative SMEs are now a top priority for the EC.

The Commission is developing a concrete agenda to "mainstream" cultural policy in other key areas such as competition and taxation, following specific instructions from EC member states at their annual Spring Council in Brussels.

The SMEs are seen as vital to Europe’s future and are officially recognised as the drivers of growth, job creation and innovation.

"The European institutions in the past have made references to the importance of culture without providing any concrete results. The official recognition of cultural and creative SMEs is a huge step forward," Zelnik explained.

"That so many different parts of the European institutions are developing a dialogue and taking into account the needs of Europe’s creative SMEs is very positive."

The Commission will now seek to put new policies in place to give SMEs referential treatment, which is seen as "economically and politically justifiable."