AlphaTheta Corporation (AlphaTheta) announced last year a deal to acquire Serato Audio Research Limited (Serato). AlphaTheta is involved in the manufacture of DJ equipment, including mixers, controllers, DJ players and all-in-one systems under the Pioneer DJ brand, and both parties are involved in developing DJ software.
After conducting an initial Phase 1 investigation, the CMA found that AlphaTheta and Serato compete closely to supply DJ software – with the latter being seen as the market leader. The deal, if allowed, would create a supplier almost double the size of its nearest rival, consolidating the market and potentially impacting the price, quality, and innovation of DJ software. The CMA is concerned that the remaining (largely much smaller) suppliers would not provide strong enough competition to constrain AlphaTheta and Serato once combined.
The CMA also found that the deal could weaken competition in various DJ hardware markets by restricting or worsening AlphaTheta’s rival DJ hardware manufacturers’ access to Serato’s software. Maintaining current levels of competition in all relevant DJ hardware types is particularly important given AlphaTheta’s already strong position these markets.
The investigation also revealed concerns that AlphaTheta’s DJ hardware competitors could be disincentivised to innovate or share information with Serato as this could then be used by the combined business in their own DJ hardware product development. Also, AlphaTheta could, after the deal is completed, reduce its own innovation efforts to stay only marginally ahead of its rivals.
Joel Bamford, Executive Director for Mergers at the CMA, said:
DJs and entertainers depend on having access to the best equipment and software in order to put on a good show.
We’ve found this deal could substantially reduce competition in DJ software, resulting in increased prices, less innovation, and less choice.
We’re also concerned it could negatively impact the hardware markets by allowing the combined business to leverage Serato’s leading software to harm its hardware competitors, ultimately affecting DJs and consumers.
It’s now up to AlphaTheta and Serato to address our concerns.
Both AlphaTheta and Serato have 5 working days to respond with meaningful solutions to the CMA, otherwise the deal will be referred to a more in-depth Phase 2 investigation.
More information can be found on the AlphaTheta / Serato case page.
Notes to editors:
- AlphaTheta is headquartered in Japan and sells DJ products – primarily under their Pioneer DJ brand – globally, including in the UK. Serato is headquartered in New Zealand and sells DJ software globally, including in the UK.
- The CMA launched its initial Phase 1 investigation in March. This 40 working day review is designed to identify whether the CMA considers that there is a realistic prospect that the deal would lead to a ‘substantial lessening of competition’ – focusing on the potential impact on customers in the UK – and therefore requires referral to a Phase 2 investigation.
- Phase 2 investigations allow an independent panel of experts to probe in more depth initial concerns identified at Phase 1.
- The merger is also under investigation by the New Zealand Commerce Commission. Details of their investigation can be found on the NZCC case page.
- For media enquiries, contact the CMA press office on 020 3738 6460 or press@cma.gov.uk.
