EMI Music Publishing (“EMI MP”), a music publishing company, is since 2012 jointly owned and controlled by Sony Corporation of America (“Sony”) and Mubadala Investment Company PJSC (“Mubadala”), an investment fund based in the United Arab Emirates. Under the proposed transaction, Sony would now acquire sole control and ownership over EMI MP.

Music publishers exploit the copyrights of authors by granting licences to users of music. The most common music publishing rights are mechanical rights (e.g. for recorded music), performance rights (e.g. for concerts and TV and radio broadcasting), online rights (e.g. for online music downloading or streaming) and synchronisation rights (e.g. for advertisements and film music).

Since 2016, the fully owned and controlled music publishing subsidiary of Sony, Sony/ATV, has been the exclusive administrator of EMI MP’s entire catalogue, whereas EMI MP itself plays no role in licensing its catalogue to digital platforms, or in signing and retaining authors.

Commission investigation

Since Sony already has joint control of EMI MP, the transaction would not lead to any increase in market share in any of the markets where Sony and EMI MP are active. Therefore, the Commission focused its investigation on assessing whether Mubadala has acted as a constraint on Sony’s ability to leverage across both recording music and music publishing rights and, in particular, into the potential impact of the removal of this constraint on any hypothetical Sony strategy for EMI MP.

As regards the provision of music publishing services to authors, the Commission concluded that, as Sony/ATV and EMI MP have not competed to sign new authors since 2012, and as Mubadala did not constrain Sony’s strategy before the merger, the merger would not raise competition concerns.

As regards the exploitation of the copyrights offline, the Commission excluded competition concerns because Sony/ATV already has the sole and exclusive right to license EMI MP’s publishing rights offline. Moreover, in relation to mechanical and performance rights the Commission concluded that control over pricing and licensing terms is in any case in the hands of collecting societies.

Finally, as regards the exploitation of publishing rights for online use, although the merger would not lead to any increase in market shares, the Commission analysed whether the transaction could increase Sony’s bargaining power vis-à-vis online music platforms in the market for online music licensing.

This is because Sony not only holds publishing rights for songs but also recording rights (via its recording division – Sony Music), and online platforms need a licence to both sets of rights to be able to offer their services. As the repertoire of songs over which Sony has publishing rights only overlaps partially with the one over which it holds recording rights, Sony has control over a larger set of songs than just the songs controlled by Sony/ATV and EMI MP.

The Commission looked into whether, after the transaction, Sony could threaten not to license its rights – publishing or recording – in order to extract better terms from online platforms. However, the Commission found that the transaction would not materially increase Sony’s bargaining power vis-à-vis online platforms, in particular because:

a)   Any strategy to extract better terms from online platforms to the benefit of both music publishing and recorded music would have also been in the interest of Mubadala before the merger, and therefore the merger would not change the current situation.

b)   The Commission found that authors could credibly threaten to switch away from Sony if it attempted to degrade the value of their publishing rights to the benefit of its recording division.

c)    Even assuming that this type of strategy would be possible and valuable for Sony, the Commission found that, on the market for the licensing of online rights in the European Economic Area, the transaction would not give rise to competition concerns, as Sony’s position vis-à-vis digital music providers would not significantly increase compared to the current situation. In fact, as is already the case today, online platforms would continue to have access to both Sony’s and third parties’ repertoire to operate in the EEA.

Therefore, following its phase I investigation, the Commission concluded that the transaction would raise no competition concerns in any of the affected markets and cleared the case unconditionally.

Companies and products

EMI Music Publishing, based in the UK, is a music publishing business currently jointly controlled by Sony and Mubadala.

Sony Corporation of America, the US subsidiary of Sony Corporation, headquartered in Japan, is a leading player in the music recording and publishing business. Sony/ATV is not a party to the transaction, but has administered EMI MP’s catalogue since 2012. Sony/ATV is the wholly-owned music publishing subsidiary of Sony Corporation of America.

MubadalaInvestment Company PJSC, based in Abu Dhabi, is a public joint stock company focused on investment and development that is wholly owned by the Government of the Emirate of Abu Dhabi in the United Arab Emirates. Mubadala is active in investing in a wide range of strategic sectors, including energy, utilities, real estate, basic industries, and services.

Merger control rules and procedures

The transaction was notified to the Commission on 21 September 2018.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

More information will be available on the competition website, in the Commission’s public case register under the case number M.8989.

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The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) launched today a public consultation to amend the Implementing Regulations on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk to reflect the outcomes of a monitoring exercise on the adequacy of existing mappings, namely changes to the Credit Quality Steps (CQS) allocation for two ECAIs and the introduction of new credit rating scales for ten ECAIs. The Implementing Regulations are part of the EU Single Rulebook for banking and insurance aimed at creating a safe and sound regulatory framework consistently applicable across the European Union (EU). The consultation runs until 31 December 2018.

In the Implementing Regulations on the mapping of ECAIs, adopted by the European Commission on 11 October 2016, the three ESAs specified an approach that establishes the correspondence between credit ratings and the credit quality steps defined in the Capital Requirements Regulation  (CRR) and in the Solvency II Directive.

The ESAs are now consulting on an amendment to the Implementing Regulation to reflect the outcome of a monitoring exercise on the adequacy of the mappings, based on a quantitative and qualitative assessment. In particular, the ESAs are proposing to change the CQS allocation for two ECAIs, together with the introduction of new credit rating scales for ten ECAIs.

The ESAs also published individual draft mapping reports illustrating how the methodology was applied to produce the amended mappings in line with the CRR mandate.

Consultation process

Comments to the Consultation Paper on the mapping under Article 136 of the CRR can be sent by clicking on the “send your comments” button on the EBA’s consultation page. Comments to the Consultation Paper on the mapping under Article 109 (a) of the Solvency II Directive can be provided using the template for comments downloadable from EIOPA’s website. Please note that the deadline for the submission of comments is 31 December 2018.

All contributions received will be published following the close of the consultation, unless requested otherwise.

Legal basis

The proposed revised draft ITSs have been developed according to Article 136 (1) and (3) of Regulation 575/2013 (Capital Requirements Regulation) and of Article 109 (a) of Directive 2009/138/EC (Solvency II Directive), which state that revised draft ITS  shall be submitted by the ESAs, where necessary.

Note to editors

This change follows a first amendment to the Implementing Regulations, which was proposed by the ESAs in 2017 and adopted by the European Commission on 24 April 2018. The first change reflected the withdrawal of the registration of one CRA and the recognistion of five additional CRAs since the adoption of the Implementing Regulations in October 2016.

Two ECAIs, Creditreform and Spread Research, have not consented to the publication of their mapping reports. In the absence of a consent, the ESAs published only the outcome of the revision, i.e. the relevant mappings in Annex III of the draft amended ITS (“Mapping tables”) together with two documents listing the applicable credit rating scales and credit rating types for each of the concerned ECAI.