Court Rules Bazaarvoice Acquisition of Rival Violates Antitrust Laws

“As in many past merger cases, unhelpful internal documents played a decisive role.’” (Shearman & Sterling)

Now you own it, now you don’t… Earlier this month, an appeals court sided with the Department of Justice, ruling that online ratings and review company Bazaarvoice’s acquisition of rival PowerReviews violated US anti-competition laws. The background, from attorneys at Shearman & Sterling:

“[T]he US District Court for the Northern District of California found that Bazaarvoice’s June 12, 2012 acquisition of PowerReviews violated Section 7 of the Clayton Act, which prohibits any merger that may substantially lessen competition. Prior to the acquisition, Bazaarvoice and PowerReviews had been the two leaders in the US for ‘Ratings and Reviews’ software and services, which allow product manufacturers and Internet retailers to solicit, moderate and display customer feedback at the online ‘point of sale.’ The elimination of PowerReviews, the District Court found, had left Bazaarvoice as an effective monopolist, with results likely to cause lasting harm to consumers in terms of both price and innovation.”

For your reference, here’s a look at what experts are saying about the ruling:

DOJ Prevails in Challenge to Bazaarvoice Acquisition of PowerReviews (Clifford Aronson, Ian John, James Keyte, Sharis Pozen, and Steven Sunshine of Skadden Arps):

“In reaching its decision, the court thoroughly applied the 2010 Horizontal Merger Guidelines and relied heavily on premerger ‘hot documents’ that reflected closeness of competition between the merged parties and an anticompetitive deal rationale. Bazaarvoice demonstrates that Section 7 defendants may find it very difficult to overcome an abundance of negative premerger documents with expert economic testimony or customer testimony at trial.” Read on>>

Bazaarvoice/PowerReviews Merger Anticompetitive (Carrie Amezcua of McDermott Will & Emery):

“[T]he Bazaarvoice litigation is further evidence that the antitrust agencies are not shy about litigating mergers they feel are anticompetitive.  The DOJ invested significant resources and time – including three full weeks at trial in California – into litigating the case, beginning with its investigation that it launched two days after the firms closed their transaction on June 12, 2012.  It has established a significant record of bringing, and winning, merger cases.” Read on>>

Bazaarvoice Shows Courts’ and Agencies’ Orthodox Approach to Mergers in High-Tech Markets (Shearman & Sterling):

“If Bazaarvoice is to be a guide in problematic transactions, the merging parties need to do much more than show that customers are not opposed to the transaction. To be effective, parties are advised to produce (1) a broadly representative set of customers that show strong support for the transaction; (2) evidence that the transaction will benefit customers in some tangible way; and (3) proof that blocking the transaction will deny customers the merger-specific benefit.” Read on>>

Another Example of Why You Should Follow the “New York Times” Rule — the Bazaarvoice Decision (Howard Ullman):

“Even the Bazaarvoice court recognized that intent itself doesn’t prove a likelihood of competitive harm, but the court clearly thought the pre-merger intent was probative and persuasive.  It rejected Bazaarvoice’s argument that the premerger documents merely evinced competitive strengths and opportunities in adjacent markets. If there had been no such hot documents in the case, the result might have been the same anyway. But why take the chance?” Read on>>

Read more on Antitrust at JD Supra Business Advisor>>