CMA announces probe into music streaming platforms

The Competition and Markets Authority (CMA) has announced it will launch a market study into music streaming “as soon as possible” to “foster effective competition in digital markets”.

CMA chief executive, Andrea Coscelli, said: “The UK has a love affair with music and is home to many of the world’s most popular artists. We want to do everything we can to ensure that this sector is competitive, thriving and works in the interests of music lovers.

“Over the past decade, the music industry has evolved almost beyond recognition, with streaming now accounting for more than 80% of all music listened to in this country. A market study will help us to understand these radical changes and build a view as to whether competition in this sector is working well or whether further action needs to be taken”.

The announcement is the latest move from the CMA to encourage competition in digital markets. On 15 July, the Department for Digital, Culture, Media & Sport (DCMS) select committee published a report on its inquiry into the Economics of Music Streaming. It identified several concerns, including the possible market dominance of the major music groups and the potential for contracts between major music labels and streaming services to stifle innovation in the streaming market.

According to the British recorded music industry’s trade association, BPI, streaming accounts for four-fifths (80.6 per cent) of UK music consumption. However, the DCMS report highlighted many musicians and performers were receiving low remuneration and not “receiving a fair share” of streaming revenues compared to labels and streaming platforms, which it said diminishes the UK’s ability to support new domestic talent.

The CMA is currently investigating Google’s ‘privacy sandbox’, Facebook’s use of ad data and Apple’s AppStore. An independent CMA panel is also investigating Sony’s completed acquisition of ‘artist and label’ services provider, AWAL.

In April, the CMA launched the Digital Markets Unit (DMU), which is currently operating in shadow form pending legislation that will provide it with full powers. The DMU will oversee a regulatory regime for the most powerful digital firms, to promote greater competition and innovation, with the aim of protecting consumers and businesses from unfair practices.

Market studies consider why particular markets may not be optimal for consumers. There are a number of possible outcomes from a market study. The CMA may: make recommendations to the government to change regulations or public policy; encourage relevant businesses to self-regulate; take consumer or competition law enforcement action against businesses; make a reference for a more in-depth (phase 2) market investigation; or give the market a ‘clean bill of health’.

Caroline Harbord, senior associate in the dispute resolution team at Forsters, said the market study announcement would “no doubt be of grave concern to streaming platforms such as Spotify”.

She commented: “If the final report suggests that such platforms have acted anti-competitively, this could lead to a gigantic ‘opt out’ class action against the platforms (in the style of the recent Collective Proceedings Orders (CPOs) granted in Merricks v Mastercard, Le Patourel v BT and Gutmann v London and South Eastern Railway Limited”. 

Harbord warned: “Given how ubiquitous streaming platforms are, the potential class of claimants could extend to all individuals who have streamed music over a specified period (potentially since the inception of the platforms), and the damages could run into billions (as was the case in each of Merricks v Mastercard and Le Patourel v BT). This is leaving aside class action that the musicians themselves could also launch.

“Le Patourel v BT is of particular relevance here, because the CAT made it clear in that case that a CPO, the order required before an ‘opt out’ group action can proceed, could be granted against BT on the basis of the findings of an Ofcom market review”.

Harbord said that the findings of the music streaming market study could provide “sufficient evidence” for a CPO to be granted against streaming platforms, “whereas the more traditional school of thought was that a specific finding of anti-competitive behaviour had to be made by the EC or CMA.”

She added: “The threshold evidential requirement for granting CPOs has therefore been lowered by Le Patourel v BT, and it seems plausible that any findings of the recently announced market study by the CMA could be enough to get an ‘opt out’ group action against the streaming platforms off the ground.

“Watch this space – while the announcement is good news for consumers and musicians, the streaming platforms may be feeling a sense of impending doom.”