If you thought not having to report your proposed acquisition to the US Department of Justice and the US Federal Trade Commission meant never worrying about antitrust issues, think again. The DOJ’s recent pursuit of Bazaarvoice, Inc. in connection with its acquisition of PowerReviews, Inc. highlights that even non-reportable transactions can give rise to serious consequences. Remedies may include not only divestitures, but other measures meant to ensure effective competition—even the clawing back of profits gained from increased market power. The case also serves as a reminder to potential buyers to fully diligence potential targets. This includes reviewing the potential anticompetitive effects of the proposed transaction, as well as any recent unreported transactions completed by the target. Failure to do so may result in buyers unwittingly acquiring antitrust liability.
Bazaarvoice acquired PowerReviews in June 2012 in a transaction that fell below the Hart-Scott-Rodino (“HSR”) Act reporting thresholds. At the time, the companies were the two leading providers of ratings and reviews platforms (“R&R Platforms”), packages of software and services that manufacturers and retailers use to allow their customers to write and post product reviews. Two days after the deal closed, the DOJ launched an investigation, and eight months after that, the DOJ filed a lawsuit in the Northern District of California challenging the merger under Section 7 of the Clayton Act. The DOJ alleged that Bazaarvoice’s purchase of PowerReviews eliminated its only meaningful commercial competitor in the US market for R&R Platforms. In January of this year, the Court agreed and found that the acquisition violated Section 7 of the Clayton Act, holding that Bazaarvoice’s purchase of its closest and only serious competitor was anticompetitive.
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