On January 8, 2014, Judge Orrick of the Northern District of California ruled that Bazaarvoice’s acquisition of competitor PowerReviews violated Section 7 of the Clayton Act. The ruling was in favor of the U.S. Department of Justice (DOJ). The public version of the opinion was made available on January 10. In its self-described “necessarily lengthy opinion,” which spans 141 pages, the court ultimately found that the facts overwhelmingly showed the acquisition will have anticompetitive effects and that Bazaarvoice did not overcome the government’s prima facie case. The case included 40 witnesses at trial, more than 100 depositions and 980 exhibits. Dr. Carl Shapiro testified as DOJ’s economist and Dr. Ramsey Shehadeh testified on behalf of Bazaarvoice/PowerReviews. The court noted that the case presented some difficult issues, including that there were no generally accepted “market share statistics covering the sales of R&R solutions or social commerce solutions and no perfect way to measure market shares.” And while neither side presented flawless analyses, the court found Dr. Shapiro’s approaches more persuasive than those of Dr. Shehadeh.
Bazaarvoice and PowerReviews each offered sophisticated “R&R platforms.” R&R platforms provide a user interface and review form for the collection and display of user-generated content (i.e., user reviews) on the product page of a commercial website where the product can be purchased. Often these are in the form of star ratings and open-ended reviews in a text box. R&R platforms increase sales for the retailer and have a variety of different features. The court noted that many on-ine retailers view an R&R platform as “necessary.” Before the merger, Bazaarvoice and PowerReviews offered similar products and features and targeted similar customers.
The court found that the relevant product market was the narrow “R&R platforms,” rather than the broader “social commerce tools” or “eCommerce platforms.” The court went through many popular social media platforms such as Facebook, Google+, Twitter, Instagram, and Pinterest, explaining why each was not a substitute for these R&R platforms. In this relevant market, the court found that PowerReviews was Bazaarvoice’s only real competitor, and thus the merger “would eliminate Bazaarvoice’s only meaningful commercial competitor.”
At the end of the opinion, the court commented on the role of antitrust “in rapidly changing high-tech markets.” It noted that there is a debate as to whether antitrust is properly suited to assess competitive effects in these markets. The court declined to take sides and stated that its “mission is to assess the alleged antitrust violations presented, irrespective of the dynamism of the market at issue.”
The case now moves to the remedy phase. In its complaint, the DOJ requested that the court order Bazaarvoice to divest assets originally possessed by either Bazaarvoice and/or PowerReviews to create a viable, competing business. However, as Judge Orrick noted, 18 months after the merger, it may not be so simple to divest assets. The judge scheduled a conference for January 22 with the parties to discuss a possible remedy.
There are several lessons to be gathered from this case. First, the [...]