Antitrust Law Daily Wrap Up, TOP STORY: Trial begins in U.S. challenge to Bazaarvoice acquisition of PowerReviews, (Sep 23, 2013)

By Jeffrey May, J.D.

The Department of Justice Antitrust Division is unable to establish each element of its case against Bazaarvoice, Inc. over its 2012 acquisition of competitor PowerReviews, Inc., Bazaarvoice has told the federal district court in San Francisco. The government’s trial in the merger challenge began today before Judge William H. Orrick, III. Bazaarvoice contends that it is entitled to judgment in its favor because the government has failed to allege a valid relevant market, high market shares in a properly defined market, and harm resulting from the transaction (U.S. v. Bazaarvoice Inc., Civ. C 13 0133).

The government filed a complaint against Bazaarvoice—the leading commercial supplier of product ratings and reviews (PRR) platforms in the United States—in January, seeking to unwind the company’s $168.2 million acquisition of rival PowerReviews. The government alleged that the transaction substantially lessened competition in the market for PRR platforms in the United States. Retailers and manufacturers purchase PRR platforms to collect and display consumer reviews online.

In light of its size, the acquisition 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 large acquisitions. The Justice Department began its investigation shortly after the transaction closed.

According to the government’s trial brief, there is substantial evidence that PRR platforms are a relevant product market and that the market should be limited to the United States. The government also argues that the merger was presumptively anticompetitive, because it significantly increased market concentration in a highly concentrated market, and that Bazaarvoice cannot rebut the government’s prima facie case. The government also pointed to internal company documents as support for its case against the merger.

Bazaarvoice, in its pre-trial brief, contends that the post-merger evidence and customer testimony demonstrate that the merger has not increased marketwide prices or given Bazaarvoice market power. In the quickly changing marketplace, time has now disproven the assertions in the internal company documents that described a history of PowerReviews as Bazaarvoice’s closest competitor and predicted an end to price erosion if PowerReviews were acquired, it was argued.

“The evidence at trial will instead show that PRR platforms are one of many offerings in the highly competitive and dynamic social commerce tools market, that competition in PRR platforms remains just as (if not much more) intense now as before the merger, and that PRR platform purchasers have not been harmed in any way,” according to Bazaarvoice.

It is anticipated that the trial will continue through October 8.

Attorneys: Michael Domenic Bonanno for U.S. Department of Justice. Daniel Paul Weick (Wilson Sonsini Goodrich and Rosati) for Bazaarvoice, Inc.

Companies: Bazaarvoice, Inc.

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