NEW YORK (The Deal) -- As argument opens Monday in the trial over the federal government's attempt to break up the June 2012 acquisition of online rating service PowerReviews by rival Bazaarvoice (BV), the key for Department of Justice lawyers will be demonstrating that retailers who rely on the services to collect customer reviews of their products have been hurt by the consummated deal.
On Jan. 10, the DOJ sued to break up the $168 million transaction, arguing that it "substantially lessened competition in the market for product ratings and reviews platforms in the United States, resulting in higher prices and diminished innovation." The DOJ alleges that Bazaarvoice is the dominant commercial supplier of product ratings and review platforms in the U.S., and PowerReviews was its closest rival. Before the transaction, PowerReviews was an aggressive price competitor. The government said this prompted the companies to offer many retailers and manufacturers substantial price discounts.
The DOJ has said the transaction stripped retailers that are not capable of setting up their own review system in-house of negotiating leverage with the ratings providers, leaving them vulnerable to anticompetitive price increases.
The trial before Judge William H. Orrick of the U.S. District Court in San Francisco will pit DOJ lawyers Claude Scott, Peter Huston and Michael Bonanno against a Wilson Sonsini Goodrich & Rosati PC team featuring Scot Sher, Jonathan Jacobson, Chul Pak and Boris Feldman.
Joshua Soven, partner in the Washington office of Gibson, Dunn & Crutcher LLP and a former DOJ litigator, said a key factor in the case will be how Judge Orrick weighs internal company documents the DOJ obtained showing Bazaarvoice officials complaining prior to the merger that competition from PowerRatings was keeping prices down, versus evidence the companies may submit showing that since consummation prices for ratings services have not increased substantially and that in the fast-moving technology market whatever harmful competitive effects DOJ alleges will be erased by new entrants and new products.