Independent music labels fighting to break-up the merger that created industry giant SonyBMG suffered a blow this morning when Europe’s highest court reversed an earlier ruling criticising the deal.

Impala, a lobby group representing around 2,000 small record labels, has fought a long legal battle against the creation of SonyBMG in 2004. The group claimed that the merged label — the world’s second largest — would be too dominant, forcing smaller rivals out of the market.

In 2006, Impala won a significant victory when it persuaded the European Court of First Instance (ECI) that the European Commission (EC) had made mistakes in its evaluation process when it approved the deal.

As a result, the court ordered the EC to re-evaluate the merger, temporarily throwing its future into question.

The EC did re-examine the merger, a 50-50 joint venture between Sony, of Japan, and Bertelsmann, of Germany, but re-approved it 2007.

Today, SonyBMG won a further legal victory. The company had appealed the court ruling criticising the EC's initial approval of the deal to the European Court of Justice, Europe's highest court. The ECJ upheld the company's appeal.

The lower court must now re-evaluate the way it reviews merger decisions; however, this would have no bearing on the approval of the SonyBMG deal.

SonyBMG has now effectively passed all possible legal challenges.

Jonas Koponen, a competition partner at Linklaters in Brusells, said: “The legal challenges to Sony BMG have created a mass of decisions and appeals, but the practical effect of today’s ruling is that the merged company can continue as normal.”

Mr Koponen said the EC’s approval of the merger still stands and it was very unlikely it would be successfully overturned in the future.

Impala said it was disappointed with today's decision. Michel Lambot, co-president, said: “When the Court of First instance overturned the first approval, it was with good reason. This final judgement confuses the issue."

Based in New York, SonyBMG’s stable includes Bruce Springsteen, Placido Domingo and ZZ Top.

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