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Franco Castelli, Mar 13, 2014
In a significant victory for the Department of Justice, the U.S. District Court for the Northern District of California recently held that Bazaarvoice’s completed acquisition of rival PowerReviews violated the antitrust laws. Bazaarvoice acquired PowerReviews in June 2012 in a $160 million transaction that was exempt from the HSR Act’s reporting and waiting period requirements because the target did not satisfy the HSR Act’s size-of-person test. Days after the acquisition closed, the DOJ opened an investigation that led to the filing of a complaint in January 2013. After a three-week trial, and relying heavily on the parties’ internal documents, the court found that PowerReviews was Bazaarvoice’s closest and only serious competitor in the market for “rating and review” platform services sold to e-commerce businesses.
The court’s opinion cites dozens of internal documents showing that, prior to the merger, “Bazaarvoice considered PowerReviews its strongest and only credible competitor, that the two companies operated in a duopoly, and that Bazaarvoice’s management believed that the purchase of PowerReviews would eliminate its only real competitor.” More than 100 Bazaarvoice customers testified at trial or through deposition that the acquisition had not harmed them, but the court found their testimony “speculative at best,” and therefore “entitled to virtually no weight.” Similarly, the court gave little weight to post-acquisition evidence regarding the transaction’s effect on pricing, holding that, since Bazaarvoice was aware of the DOJ’s pending investigation, such evidence was subject to manipulation.
The court found that the government would be entitled to an injunction requiring the divestiture of PowerReviews, but acknowledged, “that is not a simple proposition 18 months after the merger” and scheduled a hearing to discuss potential remedies. In a recently filed motion, the DOJ urged the court to order divestiture of all PowerReviews assets acquired by Bazaarvoice and require Bazaarvoice to provide certain services to the buyer to build up its customer base. Alternatively, if the PowerReviews assets are no longer viable to successfully compete in the market for rating and review platforms, the DOJ asked the court to order Bazaarvoice to license its own ratings system to a buyer.