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From Antitrust Law Daily, February 13, 2014

U.S. proposes divestiture order, additional relief in merger action against Bazaarvoice

By Jeffrey May, J.D.

To remedy “the unlawful transaction [that] entrenched Bazaarvoice’s dominance in the market for Ratings and Reviews platforms (R&R) and insulated the company from meaningful competition,” the Department of Justice filed a proposed remedy with the federal district court in in San Francisco yesterday. The proposed final judgment (PFJ) would require Bazaarvoice to divest PowerReviews and to comply with other obligations (U.S. v. Bazaarvoice, Inc., Case No. 13-cv-000133-WHO).

In January, the court ruled that Bazaarvoice’s June 2012 acquisition of PowerReviews violated Sec. 7 of the Clayton Act. The acquisition was found to have significantly increased concentration in the already highly-concentrated market for online ratings and reviews platforms (R&R), which provide an interface for consumers to rate a product online.

In its filing, the government contends that, because “more than twenty months have passed, and there is no way to turn back the clock,” the relief “must do more than merely restore the pre-merger state of competition.” Due to the deterioration of the PowerReviews assets, Bazaarvoice should be required to do more than simply divest those assets, in the government’s view. Bazaarvoice migrated many of the PowerReviews customers to its own platform.

To help the divestiture buyer build a competitive syndication network, the PFJ requires Bazaarvoice to provide cross-network syndication services to the purchaser of the divestiture assets and to waive trade-secret restrictions for any employees that are hired by the divestiture buyer. Bazaarvoice would be expected to provide cross-network syndication services to the divestiture buyer’s clients on non-discriminatory terms to ensure that customers will maintain access to syndication connections between the two platforms after the divestiture sale.

The PFJ also would require Bazaarvoice to waive trade-secret restrictions related to its R&R technology and intellectual property rights for any of its current or former employees who are hired by the divestiture buyer in order to provide the buyer with access to the product improvements that Bazaarvoice has developed since the transaction closed. Moreover, Bazaarvoice would be required to license additional assets to the divestiture buyer if the sale of the PowerReviews assets will not transfer a critical mass of customers to the buyer.

Special Master. The Justice Department has asked the court to appoint a Special Master to monitor the sale of the divestiture assets and to oversee Bazaarvoice’s ongoing compliance with the Final Judgment, including the company’s obligations to provide cross-network syndication services and transitional support services. “The Special Master is a necessary safeguard to negotiate the moral hazard that is inherent in the divestiture process,” the government explained. According to the government, the Special Master’s role will be limited, only monitoring Bazaarvoice’s conduct and reporting potential compliance issues to the court and the parties.

Reporting requirements. Lastly, to avoid a similar violation, the Justice Department has requested that the court order Bazaarvoice to report any transaction with a value exceeding $10 million to the government for a three-year period. The government noted that, following any divestiture sale, Bazaarvoice will remain the dominant player in the market and its purchase of PowerReviews, its only real competitor, fell below the statutory reporting thresholds in the Hart Scott Rodino Act. “Bazaarvoice executives either lacked even the most rudimentary understanding of the antitrust laws, or acted in conscious disregard of the law when pursuing PowerReviews,” the government noted as support for the reporting obligations.

The federal district court will hold a hearing on April 2, 2014, to address the remedy.

Attorneys: Peter K. Huston for Department of Justice. Bahram Seyedin-Noor (Alto Litigation, PC) and Daniel Paul Weick (Wilson Sonsini Goodrich and Rosati) for Bazaarvoice, Inc.

Companies: Bazaarvoice, Inc.

MainStory: TopStory Antitrust AntitrustDivisionNews

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