Monday, January 13, 2014
See update below.
Following BazaarVoice's acquisition of PowerReview in June 2012, the DOJ started an antitrust investigation. The BazaarVoice's acquisiton fell below the HSR size of person/size of transaction test so it wasn't subject to HSR premerger filing requirements.
Not being required to make HSR filings, of course, is not the same as being exempt from the antitrust laws. Turns out, no one (other than perhaps Major League Baseball) is exempt from the antitrust laws. The BazaarVoice litigation that was decided by a district court judge in San Francisco last week is another example of the Feds looking back at completed transactions for the anticompetitive effects. Last week in BazaarVoice, the DOJ was able to secure an order from the court to undo the transaction (BazaarVoice Opinion).
Though the remedy is extreme, it shouldn't really be a surprise. Why? Here's how the folks at BazaarVoice internally described the benefits of the acquisition of PowerReview:
"Eliminate [Bazaarvoice's] primary competitor and provide relief from ... price erosion."
Hmm. Eliminating your primary competitor and stopping price erosion. Sounds good to the business types, but to deal lawyers that should sound like fingernails on a chalkboard. But it gets worse...
Collins, then BazaarVoice's CFO suggested that ... BazaarVoice could either compete against PowerReviews and "crush" them, or dammit lets just buy them now"
Buying your primary competior to eliminate competition? Bad. Turns out when you buy your primary competitor, reduce competition and generate larger margins for yourself as a result, the DOJ takes notice, even if you weren't required to make an HSR filing.
Following the transaction, the anticompetitive effects of the deal were obvious to the court, and the DOJ got its order to unscramble the eggs. You can download the District Court's BazaarVoice Opinion here.
Update: OK, so apologies to those involved, the Court has not yet ordered the taking apart of the deal. What it has done is found that BazaarVoice violated Section 7 of the Clayton Act and has ordered the parties back on January 22, 2014 to discuss what remedy is appropriate. Clearly, unscrambling the eggs is one possible remedy, but there may be others acceptable to the government and BazaarVoice. Here's BazaarVoice's Press Release related to the court's decision.