UK CMA to launch market study into digital music streaming services

• United Kingdom

• Competition, EU and Trade
• Technology, Media and Telecoms - Media

26-10-2021

On 19 October 2021, the Competition and Markets Authority (“CMA”) announced its intention to undertake a market study into music streaming. This decision stems from a recommendation by the UK Government following its investigation into music streaming.  Once the CMA has clarified the final scope of the proposed study, it will launch the study at the earliest opportunity.

Background

In October 2020, the Select Committee of the Department for Digital, Culture, Media and Sport (“DCMS”) launched an inquiry to consider the impact of music streaming on the creators and companies that comprise the music industry and examine the long-term sustainability of the industry itself.  As part of the inquiry, the DCMS Select Committee received almost 300 pieces of written evidence and held seven oral evidence sessions gathering feedback from performers, songwriters, composers, music companies, trade bodies, collecting societies, government ministers and the streaming services themselves.

On 15 July 2021, the DCMS Select Committee published its report of its inquiry into the Economics of Music Streaming. This identified a number of concerns, including:

• the possible market dominance of the major music groups; and
• the potential for contractual agreements between the major music companies and streaming services to stifle innovation in the streaming market.

The DCMS Committee made a number of recommendations including that the CMA conduct a market study to consider how the major music groups’ market position in both recording and publishing has influenced the relative value of song and recording rights.

Following correspondence between the CMA, the DCMS and the Department for Business, Energy and Industrial Strategy (“BEIS”), on 19 October 2021, the CMA published a letter from Andrea Coscelli, Chief Executive of the CMA, to the DCMS and BEIS confirming the CMA Board’s decision to conduct the market study into music streaming. According to this letter, the CMA’s decision was based on its prioritisation principles, as the market study is aligned with the CMA’s strategic goal to foster effective competition in digital markets. Furthermore, the CMA acknowledged the need for the market study in light of the rapid change that has taken place in the music industry over the last ten years, noting that music streaming now accounts for 80% of all music listened to in the UK.

How do market studies work?

Market studies are designed to identify and address competition and consumer protection issues in a particular market by establishing the potential causes of why a market may not be working well. The CMA will consider economic drivers and patterns of consumer and business behaviour during a market study.

Market studies are conducted under the CMA’s general review function in section 5 of the Enterprise Act 2002. The CMA will issue requests for information and also has statutory investigatory powers available to it during a study to give notice requiring any person to:

• attend a specified place to give evidence to the CMA or a person nominated for the purpose;
• produce specified documents or categories of documents that are in that person’s custody or under his control; and
• supply specified forecasts, estimates, returns or other information in a specified form and manner.

Failure to comply with the CMA’s investigatory powers can result in the imposition of penalties.

At the end of a market study, the CMA will publish a report of its findings and if applicable, the action it proposes to take. Some market studies will result in the CMA making a reference for a market investigation, where a more detailed examination of the market is undertaken.

Comment

Digital markets are a key focus area for many competition authorities worldwide and the CMA’s announcement is another example of regulatory scrutiny of the digital economy.  In addition, in the UK, BEIS recently conducted a consultation on a proposed new pro-competition regime for digital markets to be operated by an independent Digital Markets Unit (“DMU”) within the CMA.  Under this proposal, the DMU would have the power to:

• designate certain firms with “strategic market status”. Those firms would be required to comply with a tailored code of conduct which, if broken, could result in remedies or penalties;
• intervene in the market to boost long term competition; and
• scrutinise and block mergers involving the most powerful digital firms.

How can Eversheds Sutherland help?

We have extensive experience in advising businesses in sectors subject to market studies and investigations.  For further information on the implications of the CMA’s proposed market study into digital music streaming services for you and your business please contact: 

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