Antitrust Law Daily Wrap Up, ANTITRUST NEWS: U.S. Challenges Bazaarvoice's Consummated Acquisition of PowerReviews, (Jan 11, 2013)

By Jeffrey May, J.D.

The Department of Justice filed a civil antitrust complaint on January 10 in the federal district court in San Francisco, challenging Bazaarvoice Inc.'s June 2012 acquisition of PowerReviews Inc. The Justice Department said that the $168.2 million transaction substantially lessened competition in the market for product ratings and reviews platforms (PRR platforms) in the United States, resulting in higher prices and diminished innovation. The Justice Department seeks an order requiring Bazaarvoice to divest assets, whether they were originally possessed by Bazaarvoice, PowerReviews, or both, to create a competing business to replace PowerReviews' competitive significance in the marketplace (U.S. v. Bazaarvoice Inc., Civ. C 13 0133).

According to the Justice Department's complaint, Bazaarvoice is the dominant commercial supplier of PRR platforms in the United States, and PowerReviews was its closest rival. Retailers and manufacturers purchase PRR platforms to collect and display consumer reviews online. “By acquiring PowerReviews, Bazaarvoice eliminated its most significant rival and effectively insulated itself from meaningful competition,” the government alleged.

As in the Justice Department's recently announced complaint challenging the Twin America LLC joint venture for hop-on, hop-off bus tours in New York City, the complaint against Bazaarvoice points to internal company documents in its attempt to establish that the transaction is anticompetitive. According to the government, a 73-page memorandum to the Bazaarvoice board of directors touted that the acquisition would “block[] entry by competitors” and “ensure [Bazaarvoice's] retail business [was] protected from direct competition and premature price erosion.”

Bazaarvoice's acquisition of PowerReviews was not reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which requires companies to notify and provide information to the Justice Department and the FTC before consummating certain acquisitions, because it was below the reporting threshold. The Justice Department said that it began its investigation shortly after the transaction closed.

“Bazaarvoice bought PowerReviews knowing that it was acquiring its most significant rival and hoping to benefit from diminished price competition,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice Antitrust Division. “Without competitive pressure from PowerReviews, Bazaarvoice will be able to increase prices to retailers and manufacturers for its product ratings and reviews platform. This lawsuit seeks to prevent one firm from dominating the product rating and review platforms market, and demonstrates that transactions that are not reported to us are not immune from scrutiny.”

Bazaarvoice Response

Bazaarvoice issued a statement in response to the Justice Department complaint, saying that it was “disappointed” with the filing of the lawsuit. “We provided the DOJ with extensive documents, data, and information demonstrating that our acquisition of PowerReviews was procompetitive and did not result in a lessening of competition,” the company maintained. “We spent more than six months explaining that there is robust and ample competition in the market for social commerce engagement tools. We disagree with the DOJ's decision to ignore that evidence and we will now shift our attention to a court of law where we expect to be fully vindicated.”

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