17. Staff Rotation

  1. Executives and sales representatives from major record companies change jobs rapidly between majors, carrying with them information with regard to the commercial conditions of their former employer.
  2. A low number of Sony BMG staff has been employed by another major in the past 5 years. Sony BMG submit that they are not aware that such movements are more frequent than in any other industry, that these departing executives are subject to confidentiality obligations, and that information held by a moving executive will rapidly become obsolete.
  3. The Commission indeed recognizes that in an industry with four majors, which have been cutting staff because of the current downturn in sales, it is not abnormal that some [10-20]% of senior staff has worked for a competitor in the past. During the market investigation, several retailers have claimed that commercial staff rotation also increased the transparency of commercial conditions granted by competitors. One Belgian retailer for example explained that after the move of their commercial contact from one major to another, the subsequent yearly commercial negotiations were much more difficult because this commercial contact knew the different conditions granted by the two majors to that retailer and because the conditions of the major he had moved to were more advantageous than the one he came from. This retailer nevertheless claimed that even though the yearly negotiations were harder, it was able, thanks to its bargaining power, to retain the same commercial conditions as for the past year and therefore did not lose out as a result of that commercial staff rotation.
  4. It can be concluded that staff rotation does indeed take place and that when this happens, transparency of commercial conditions may be increased. This phenomenon, taking place in every industry, is however limited in scope and result, and the Commission found evidence that it does not take place on a widespread basis which would result in a significantly increased transparency with regard to the commercial conditions of all majors.

This item is part of the series of posts based on the European Antitrust Agency 2007 Music Industry Analysis for the Sony BMG Case. It’s home page is here.

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