Court proceedings began yesterday in the federal government’s antitrust case against Bazaarvoice Inc., which the U.S. Department of Justice says is monopolizing the online product ratings and reviews market following the company’s 2012 acquisition of PowerReviews Inc.
The Justice Department contends in court papers that, before the acquisition, the two companies had operated “essentially as a duopoly” that dominated the market for online ratings and reviews. “Bazaarvoice was the market leader and PowerReviews was its most prominent rival, the No. 2 company in a two-horse race,” the department says.
The Justice Department argues that Bazaarvoice and PowerReviews competed heavily on price—a that Bazaarvoice removed that competition by acquiring PowerReviews for $168.2 million on June 12, 2012. “By acquiring PowerReviews, Bazaarvoice eliminated its most significant competitor,” the department says in court papers, noting that the acquisition “substantially increased Bazaarvoice’s market share to 55%. “It is positioned to raise or maintain prices for customers in the United States above the level that would have prevailed absent the merger.”
The Justice Department launched an investigation of the Bazaarvoice-PowerReviews deal on June 14, 2012, and now charges the acquisition violates antitrust law under the Section 7 of the Clayton Act.
Bazaarvoice denies that its acquisition of PowerReviews has adversely affected the market, and contends that the Justice Department overlooks product review technology and services sold by other providers as well as applications developed in-house by users. “We believe the trial will clearly demonstrate that our combination with PowerReviews has been pro-competitive,” a Bazaarvoice spokesman says. “The cumulative effect of new and energized rivals, in-house capabilities and the increasing attractiveness of social marketing suites has more than replicated the competitive influence of PowerReviews. The post-merger marketplace remains dynamic and robust with innovation, and we believe—along with the great majority of our clients—the transaction has led to substantial consumer benefits.”
Bazaarvoice has more than 800 product ratings and reviews clients in the United States, including about 350 former PowerReviews clients, the Justice Department says in court papers. It notes that Pluck, Bazaarvoice’s closest competitor, has “far fewer” product reviews clients.
Pluck, a unit of Demand Media Inc., provides product ratings and reviews services among a suite of products it defines as addressing social engagement and social commerce, including online forums and blogs. Pluck says it has more than 600 clients, including retailers Target Corp. and Whole Foods Market. Other clients include Southwest Airlines, the National Football League and consumer brand manufacturers Nestle, Kraft Foods and Mattel.
Bazaarvoice has 280 clients listed among the Internet Retailer 2013 Top 500 Guide. Among some 40 other providers listed in the guide, the vendor with the next highest total is BizRate, with eight. Pluck and several others each have two. Ninety-eight retailers in the Top 500 note that they built their own customer ratings and reviews systems.