Another Example of Why You Should Follow the “New York Times” Rule — the Bazaarvoice Decision

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Have you heard of the New York Times rule? The rule is: don’t write something down in a business communication unless you’re comfortable with its text appearing in the New York Times. If everyone followed this rule, lawyers would be substantially less busy than they are. Unfortunately for clients, employees and other stakeholders often seem to forget the rule.

And so in the recent decision in United States v. Bazaarvoice, Inc., Case No. 13-cv-00133-WHO (N.D. Cal. Jan. 8, 2014) (Orrick, J.), the Court agreed with the Department of Justice and held that Bazaarvoice violated the Clayton Act when it acquired its primary competitor, PowerReviews. (The two companies compete in the area of online commerce known as “Ratings and Reviews” platforms for e-retailers and others.) The court found the evidence that Bazaarvoice and PowerReviews expected the transaction to have anticompetitive effects was “overwhelming.” The court cited numerous internal Bazaarvoice communications – including:

  • that the transaction would enable the combined company to “avoid margin erosion” caused by “tactical ‘knife-fighting’ over competitive deals”;
  • that the acquisition was an opportunity to “tak[e] out [Bazaarvoice’s] only competitor, who . . . suppress[ed] [Bazaarvoice] price points . . . by as much as 15% . . . .”;
  • that there were “[l]iterally no other competitors,” and the acquisition would result in “[p]ricing accretion due to [the] combination” of the two firms;
  • that the executive team thought the transaction would improve “pricing power;”
  • that “taking out one of your biggest competitors can be game-changing;”
  • that a “pro” of the deal was “[e]limination of our primary competitor”; and
  • that the deal would “[c]reate[] significant competitive barriers to entry and protect[] [Bazaarvoice’s] flank.”

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? You’re much better off following the New York Times rule.

[View source.]

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Howard Ullman, Orrick, Herrington & Sutcliffe | Attorney Advertising

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