Indie Music Labels File European Commission Complaint Against YouTube

1:06 AM PST 06/30/2014 by Scott Roxborough
Chris Pizzello/Invision/AP
Adele

Impala, which represents 4,000 small labels including the homes of Adele, Royksopp and Mogwai, claims YouTube is threatening to drop their music if they don't sign up to Google's new music subscription service.

Impala, a group that represents independent music labels in Europe, has filed a complaint with the European Commission against YouTube, alleging that the Google subsidiary is abusing its dominant position ahead of the launch of its new music subscription service.

Impala's letter to the commission remains confidential, but in a summary published on its website, Impala claims YouTube has sent independent music labels a non-negotiable contract, offering terms worse than those already given to major label acts. If a label doesn't sign, the complaint alleges, YouTube has threatened to remove their videos from its existing free service.

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This is only the latest action against Google in Europe, where numerous groups have filed antitrust complaints against the Internet giant. Google has so far not been found in breach of any European regulations.

Impala claims YouTube has breached European antitrust laws in five separate ways in its attempt to sign up artists for its new service, an ad-free music subscription similar to Spotify.

A major point of contention is Impala's claim that YouTube has threatened to remove indie labels' music videos from its free ad-supported site if they decline to join the new subscription service. Impala and other labels believe linking the two services amounts to an abuse of Google's near monopoly in online video in Europe. If the European Commission's antitrust watchdogs agree and find Google guilty of abusing its dominant position, they could fine the company up to 10 percent of its revenues.

Citing EC competition commissioner Joaquin Almunia, the Impala letter says it is time for Europe to take "urgent action" against Google.

"Commissioner Almunia has already underlined the importance of the contribution made by independent music companies," writes Impala executive chair Helen Smith. "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?"

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YouTube is by far the largest online video service in Europe, though its exact share of the market — or Europe's share of YouTube's global music video business — is not clear. Google did not initially comment on the Impala complaint.

The contract apparently sent by YouTube to indie labels was published on music industry site Digital Music News. In it are several controversial clauses, including restrictions to how labels and artists can handle exclusive releases and marketing of their work. Particularly controversial is the so-called favored nation clause, which appears to suggest that if a major label agrees to lower royalty rates for streams of their music on YouTube's subscription service, then indie labels would be required to accept those lower rates too.

YouTube claims labels representing 95 percent of the recorded music industry — including several indie distributors — have signed up for its new service.

The European Commission has taken aim at Google before. Last month, the European Union's Court of Justice backed the "right to be forgotten," ruling that Google must delete "inadequate, irrelevant or no longer relevant" data from its search results if a member of the public asks it to. There are also outstanding complaints against Google in Europe that allege anti-competitive behavior concerning online search and advertising and its app store, Google Play. 

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