​Universal Music 'cooperating fully' with Chinese probe of music-licensing market

Universal Music Group, one of the world's biggest music labels, is cooperating fully with China's competition regulator in an investigation of the country's online music-licensing market, MLex has learned.

The news comes despite a Chinese media report on Wednesday that cited an unidentified person from Tencent as denying the existence of any ongoing probe in the industry, without elaborating further.

The California-based company had been "addressing any questions that the authority has regarding the licensing sector" as part of the probe, MLex was told.

MLex reported on Monday that the State Administration for Market Regulation had started an official investigation of Chinese music-streaming service Tencent Music's potentially anticompetitive exclusive-licensing agreements with Universal Music, Sony Music Entertainment and Warner Music Group. The move
highlights the authority's determination to protect competition in the fast-growing platform economy.

The Big Three labels — alongside music platform operators Apple, Alibaba, Baidu, NetEase and Huawei — have been questioned by SAMR in the investigation, which was formally launched in January.

Universal Music has not been listed as a formal target of the probe, MLex was told in answer to questions about the role of the music company in the matter.

Unlike a horizontal agreement investigation, which typically involves more than one party, SAMR's probe is said to be focused on the potential harm to competition specifically arising from Tencent Music's conduct.

Even though exclusive copyright agreements are not in themselves harmful to competition, Tencent Music's re-licensing practices are said to have limited the ability of rivals such as NetEase's Cloud Music, Alibaba's Xiami Music and China Mobile’s Migu Music to access the world’s most popular and valued
music resources.

Tencent Music boasts China’s largest music library, which comprised 20 million tracks from more than 200 labels as of mid-2018. Although the company has agreed to license an overwhelming 99 percent of its copyrighted resources to certain competitors, it remains in exclusive possession of 200,000 tracks
that arguably capture a significant proportion of market demand.

In markets outside China, music platforms are normally licensed directly by music labels or their agents, rather than through a competitor.

Tencent Music had not responded to a request by MLex for official comment by the time this story was published.

The current investigation is China's first-ever probe involving non-price vertical agreements since the Antimonopoly Law took effect in 2008. It is expected to offer both the business and legal communities an insight into SAMR's thinking on problematic vertical agreements.