AlphaTheta and Serato are both active in the DJ segment of the music industry. AlphaTheta supplies DJ hardware under the Pioneer DJ brand and DJ software under the rekordbox brand, and Serato supplies DJ software. Serato’s DJ software is currently integrated with many brands of DJ hardware, including Pioneer DJ.

The merger proposed bringing together two of the most popular DJ software brands and would have also combined ownership of the most popular DJ software brand (Serato) with the most popular DJ hardware brand (Pioneer DJ).

Chairman Dr John Small said that the Commission was not satisfied that the merger would not have the effect of substantially lessening competition in the markets for DJ software and DJ hardware.

“The evidence gathered by the Commission indicated that Serato and rekordbox compete closely in the DJ software market. While other DJ software providers would remain in the market, we did not consider these rivals, or the possibility of a new DJ software provider entering the market in the near term, would be sufficient to replace the level of competition that would be lost with the merger. We therefore could not exclude a real chance that the merger would result in a substantial lessening of competition for DJ software, resulting in price rises to consumers and/or a lower quality software offering,” Dr Small said.

“We were also concerned the proposed merger would substantially lessen competition by making it harder for DJ hardware rivals to compete with Pioneer DJ. Serato is an important piece of software for DJ hardware providers to integrate their DJ hardware products with, and the evidence before us indicated that the merger could give ATC the means to either eliminate or worsen DJ hardware rivals’ ability to integrate their products with Serato. We were also concerned the merger would provide ATC with access to its DJ hardware rivals’ commercially sensitive information, including information about unreleased products shared in the integration process, which could provide ATC with a competitive advantage and lessen the incentive on both ATC and its rivals to innovate.”

A public version of the Commission’s written reasons for the decision will be available on the Case Register in the near future.

Background

The proposed acquisition is also under investigation by the United Kingdom’s Competition and Markets Authority (CMA). Details of the CMA’s investigation can be found on its case page.

The proposed acquisition came to our attention as part of our merger surveillance programme, where we identify mergers that have not been notified to the Commission. As part of this programme, Commission staff gather information from various sources, including public sources, to identify mergers that could give rise to competition concerns in a market or markets in New Zealand.

When considering a merger clearance application, the Commission must focus on whether any competition that would be lost with the merger would be substantial. We will give clearance to a proposed merger only if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

Further information explaining how the Commission assesses a merger application is available on our website.