Independent music companies trade body Impala has threatened to derail BMG's planned $2.09 billion sale of its music publishing wing to Vivendi.

Independent music companies trade body Impala has threatened to derail BMG's planned $2.09 billion sale of its music publishing wing to Vivendi.

The Brussels-based association, which successfully torpedoed the Sony merger with BMG at the EU's courts in July, warned that the publishing sale would fail to win regulatory approval. A merger of BMG Music Publishing and Universal Music Publishing would damage competition in recorded music and extend existing collective dominance in publishing, Impala said.

The deal, the trade body added, would also strengthen existing collective dominance in publishing, and prejudice collecting societies and the online licensing and synchronization markets.

The group -- whose 2,500 members include the Beggars Group and Naïve -- is expected to pressure EU authorities to scrutinize the sale ruthlessly when it is formally notified to the European Commission for approval. Impala noted that when EMI and Warner Music attempted to merge in 2000, the Commission had indicated that more concentration in the music publishing market could not be tolerated; the two withdrew their bid before the Commission had the chance to formally reject it.

"The Commission will have little choice but to reach the same conclusion with BMG and Universal in 2006, where the market is even already more concentrated than in 2000," Impala president Patrick Zelnik said, adding, "This move contradicts Universal's own position in 2000 when it opposed the attempted EMI Warner, precisely because of the impact of further concentration in music publishing."

The proposed sale of BMG Music Publishing comes just two months after the Court of First Instance, the EU's second-highest court, annulled the BMG recorded music merger with Sony. The court upheld an Impala appeal that the Commission had been wrong to approve it. EMI and Warner Music subsequently shelved their own merger plans.

Thomas Rabe, BMG's finance director, has insisted the sale to Universal would be approved by the end of the year, and that the Sony BMG merger would be resubmitted to the Commission this fall.

Vivendi, the French media group, announced yesterday (Sept. 6) it had outbid six other would-be buyers, including Warner and Viacom, for BMG's music publishing unit.

Under EU regulations, a merger must be blocked if it creates a dominant position, as it would likely result in higher prices, less choice and innovation. Dominance, in its different forms, will remain the main scenario -- the central question is whether sufficient competition remains after the merger to provide consumers with sufficient choice.

If Universal succeeds in its acquisition of BMG Music Publishing -- currently ranked third in the world -- then it would cut the number of major music publishers from the existing five to four. Bertelsmann has indicated that any buyers will have to bear the risk of getting regulatory clearance from the EC.