Bazaarvoice PowerReviews Deal Can Be Blocked by U.S.

The U.S. Justice Department won a lawsuit challenging online product review software maker Bazaarvoice Inc.’s $168 million acquisition of PowerReviews Inc., its biggest competitor.

The government alleged the 2012 deal would devastate competition in the market for product ratings and review software and lead to higher prices for retailers and manufacturers that use it. Bazaarvoice’s customers include Best Buy Co., Costco Wholesale Corp. and Crate & Barrel.

During a nonjury trial in October in San Francisco that lasted almost three weeks, Justice Department antitrust attorneys alleged that Bazaarvoice executives sought the PowerReviews acquisition to diminish competition and eventually raise prices. Many customers of the Austin, Texas-based company faced higher prices after the deal was completed, the government said.

“Bazaarvoice and PowerReviews each asserted that the merged firm could increase prices post-merger,” U.S. District Judge William H. Orrick wrote in yesterday’s ruling. “Someone with 100 percent of the market could do so even more profitably.”

The government proved the acquisition would substantially lessen competition or tend to create a monopoly, while Bazaarvoice failed to rebut the government case, the judge said.

While the government is entitled to an injunction requiring Bazaarvoice to divest PowerReviews, that isn’t “a simple proposition 18 months after the merger,” Orrick said. He scheduled a conference for Jan. 22 to discuss possible remedies.

Bazaarvoice said in a statement it won’t make a decision about an appeal until after the remedy phase of the case.

‘Beneficial’ Merger

“We are disappointed in the outcome of the litigation. We believe that the merger with PowerReviews has been beneficial to customers, as did the more than 100 customers who testified that they did not believe that the acquisition affected them adversely in any way,” Gene Austin, the company’s president, said in the statement.

Bazaarvoice’s lawyers said the merger represented no threat to competition because businesses are building their own ratings and reviews systems and can buy software from other competitors. Inc. provides a web platform with a product rating and review solution that has been adopted by companies including Fruit of the Loom Inc. and Samsonite, the attorneys said.

While some Bazaarvoice executives predicted that the deal would lead to less price competition, “post merger market realities have shown that any hope for higher prices was just a pipe dream,” Boris Feldman, Bazaarvoice’s attorney, said in a post-trial court filing.

“As shown during trial, Bazaarvoice executives clearly intended to eliminate competition by acquiring PowerReviews,” Assistant Attorney General Bill Baer, in charge of the antitrust division, said yesterday in a statement. ‘Anticompetitive transactions that are not reported to federal agencies will not receive a free pass.’’

The case is U.S. v. Bazaarvoice Inc., 13-cv-00133, U.S. District Court, Northern District of California (San Francisco).

Before it's here, it's on the Bloomberg Terminal.