On Jan. 8, 2014, Judge William Orrick of the U.S. District Court for the Northern District of California, issued an order after a three-week trial ruling that Bazaarvoice, a provider of Ratings and Reviews platforms (R&R) to companies involved in online commerce in the United States, violated Section 7 of the Clayton Act, 15 U.S.C. § 18, when it acquired its primary competitor, PowerReviews. United States v. Bazaarvoice, Inc., No. 13-cv-00133-WHO (N.D. Cal. Jan. 8, 2014). Bazaarvoice acquired PowerReviews on June 12, 2012, for cash and non-cash consideration valued between $150.8 million and $168.2 million. The transaction was not reported to the U.S. Department of Justice or Federal Trade Commission because the amount of the consideration did not exceed the thresholds for reportable transactions under the Hart-Scott-Rodino Act.
Bazaarvoice and PowerReviews both provide R&R platforms to companies involved in e-commerce. These platforms combine software and services to enable manufacturers and retailers, as well as other companies, to collect, organize, and display online consumers' product reviews and ratings. The goal of R&R platforms is to increase the conversion rate of consumers who see the posted reviews and ratings. The court found that R&R is critical for companies selling products over the Internet, and is a separate product market for antitrust purposes. It also found that the geographic market is the United States because of, among other things, the realities of marketing and servicing R&R platforms locally, cultural differences in moderating user-generated content, and the difficulties of incorporating different SKUs (Stock Keeping Units).
In deciding that the transaction had anticompetitive effects,
the court relied heavily on evidence generated by Bazaarvoice and
PowerReviews both prior to and in connection with the transaction.
The court explained that "[t]he evidence that Bazaarvoice and
PowerReviews expected the transaction to have anticompetitive
effects is overwhelming. Bazaarvoice recognized PowerReviews as its
only real commercial competitor, and vice versa. Exhibit after
exhibit manifest that Bazaarvoice and PowerReviews viewed
themselves as operating in a 'duopoly' and that removing
PowerReviews ... would eliminate Bazaarvoice's only meaningful
commercial competitor."
The court found that Bazaarvoice was unable to rebut DOJ's
prima facie case. It did not accept Bazaarvoice's
argument that its purchase of PowerReviews was to allow it to
compete more effectively in broader advertising and "big
data" markets. It also rejected the argument that alternative
suppliers or potential market entrants—such as smaller
companies in the R&R market, in-house solutions, or larger
Internet-based companies—can substitute for the R&R
platforms Bazaarvoice provides and meaningfully restrain
Bazaarvoice's pricing in the next two years. The court also
discounted Bazaarvoice's effort to rely on 104 customer
depositions regarding the effects of the merger.
The court noted that its decision is limited to a finding of liability, but that based on that finding, the DOJ would be entitled to an injunction requiring Bazaarvoice to divest PowerReviews. On Jan. 22, 2014, the court held a status conference and then entered an order establishing a briefing schedule for the remedy phase of the case, with briefing to be concluded by March 12, 2014. If necessary, the court will hold a hearing on April 2, 2014.
A copy of the decision is available here.
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