Brussels, 27th June 2014

Dispute between YouTube and independent music companies – formal process starts in Brussels

IMPALA invites the European Commission to red card YouTube

Amidst ongoing concerns about the conduct of YouTube towards the independent label community, IMPALA the independents’ organisation based in Brussels, confirmed today that the formal process in Brussels has now started, with a detailed complaint lodged with the European Commission earlier this week.

The complaint focuses on a series of breaches of European competition rules, setting out 5 specific instances of conduct which IMPALA says is illegal given YouTube’s position as a gatekeeper to the online market. IMPALA claims that YouTube is effectively creating artificial barriers to accessing the digital market.

This case has also attracted interest because of the negotiating tactics reported by independent companies who have been told their artists’ videos would be blocked if they did not agree to sign up to non-negotiable contracts regarding YouTube’s new premium subscription service. More recently the contracts have been published, with analysis by industry experts illustrating why the independents felt their terms are abusive.

IMPALA’s complaint asks the Commission to put a stop to YouTube’s conduct urgently through so-called “interim measures”. The Commission is also requested to order that YouTube cannot enforce contracts already signed.

Helen Smith, Executive Chair of IMPALA said: “The formal process has started in Brussels where the European Commission has consistently shown it will take a stance to ensure its competition rules are properly respected. Commissioner Almunia has already underlined the importance of the contribution made by independent music companies. This is a crucial moment for the development of the online music market with European services leading the charge. What kind of legacy will Europe give those companies? How does Europe want its artists and consumers to be treated? We look to Commissioner Almunia to take urgent action. It’s red card time.”

IMPALA’s complaint underlines that YouTube’s conduct is illegal on a number of counts. YouTube is insisting on extracting a package of rights that no other partner could get away with. The terms appear to seriously undervalue existing deals in the marketplace with other business partners. They also appear to include a highly controversial ‘least favoured nation’ clause, as well as provisions regarding delivery of content that restrict the freedom of labels and their artists to decide how to handle releases and marketing such as exclusives. This goes far beyond what would be agreed with any other service.

The terms are also suspected to breach competition rules because they are not comparable to the terms that are believed to have been reached with the majors. Discrimination is illegal when it is carried out by dominant companies and European competition rules exist to stop companies acting abusively when they become big enough to dominate the marketplace.

As well as issuing a red card and stopping YouTube’s conduct, the EC could also issue a fine of up to 10% of its turnover worldwide. With advertising revenues alone reported to be $5.6 billion, YouTube could be facing a fine north of $500m.

About IMPALA

IMPALA was established in April 2000 to represent European independent music companies. One of IMPALA’s missions is to keep the music market as open and competitive as possible. IMPALA has an impressive record on competition cases in the music sector. The first EMI/Warner merger was withdrawn in 2001 following objections from the EU after IMPALA intervened, in its first year of existence. It also won a landmark judgment in 2006 in the Sony/BMG case, and when Sony acquired 30% of EMI publishing in 2012, it was at the cost of significant divestments. The biggest set of remedies proportionately ever in a merger case was secured later that year, when UMG was forced to sell two thirds of EMI records and had to accept ten years of scrutiny over the terms of its digital deals. When WMG bought Parlophone in 2013, IMPALA secured a hefty divestments package for its members. On top of mergers, IMPALA has also been involved in other anti-trust cases involving the music sector, such as the abuse complaint against YouTube in 2014 and the call for regulating unfair business practices by large online players. IMPALA has also submitted observations on Apple’s bid to acquire Shazam.  See the organisation’s other key achievements in IMPALA’s milestones.