ComCom rejects Trade Me's takeover of rival online auto marketplace Motorcentral
By Paul McBeth
March 9 (BusinessDesk) - The Commerce Commission has rejected online auction site Trade Me's purchase of rival auto marketplace Motorcentral, saying it couldn't rule out the tie-up undermining competition in the market.
The antitrust regulator turned down Trade Me's clearance to acquire Christchurch-based Limelight Software after almost eight months of reviewing the application. Wellington-based Trade Me wanted to run Limeight's Motorcentral as a standalone business, while also letting dealers upload their listings to a range of websites including Autotrader, Driven, and Trade Me Motors.
"The merger would combine Trade Me, which is the most popular online classified advertising platform for motor vehicle dealers, and Motorcentral, which is the largest provider of DMS (dealer management software) products to independent motor vehicle dealers in New Zealand," commission chair Mark Berry said in a statement. "Based on the evidence received, we could not exclude the real chance that this could result in a substantial lessening of competition in these markets, including deterring new entry."
Trade Me's application to buy Limelight attracted opposition from several submitters, including Autotrader owner Bauer Media, and the commission told the company it wasn't inclined to approve the deal in a letter of unresolved issues sent in December.
Berry said the regulator was concerned a merger would create barriers for dealers who don't use Motorcentral's software and restrict them from using rival classified advertising websites. It could also limit the ability of new entrants to the market, he said.
"On the evidence available to us, we could also not exclude the real chance that, absent the merger, Trade Me could become a stronger competitor to Motorcentral," Berry said. "The merger could also entrench the market power Trade Me holds for online classified advertising to motor vehicle dealers."
Trade Me Motors head Alan Clark said he was disappointed with the decision, but will wait for the full reasoning to be released before deciding on whether to appeal.
"We’ll consider all our options, including appealing the decision," Clark said. "We’ll also explore how we can work with Motorcentral to deliver some of the benefits we planned to our mutual customers."
Trade Me's rejected acquisition came at a time when new car sales were regularly breaking annual records, with an expanding population and strong tourism sector driving demand for private and rental vehicles, while a resilient currency made imports cheaper.
The company's shares closed at $4.33 yesterday and have dropped 19 percent over the past 12 months.