Canadian COMPETITION LAW

January 16, 2014

Mark Katz and John Bodrug (Davies Ward Phillips & Vineberg in Toronto) have published a quite good new note on the risks of managing document creation in light of a merger review, entitled: “Compliance Alert: The Importance of Managing Document Creation – Update on the Bazaarvoice/PowerReviews Transaction”.  A good note on discussions and document creation in light of an impending merger.  Introduction:

“Bazaarvoice and PowerReviews were the two leading providers of online ratings and review platforms for retailers and manufacturers.  The acquisition, which was below the relevant merger notification thresholds in the United States, closed in June 2012.  The U.S. DOJ started an investigation two days later and filed its court challenge in January 2013.  Earlier this month, a California District Court ruled in favour of the U.S. DOJ, finding that the merger violated U.S. antitrust laws.  The Court made this finding even though no customers testified that they believed they would be harmed by the merger, and neither Bazaarvoice nor PowerReviews were profitable.

In accepting the U.S. DOJ’s position that the acquisition would significantly diminish price competition for online ratings and review platforms, the Court made extensive reference and gave considerable weight to, among other things, Bazaarvoice’s internal e-mails, strategy documents and board presentations, public SEC filings, and investor presentations that, for example, listed only PowerReviews as a significant competitor, referenced numerous ‘barriers to entry’, and predicted price rises as a result of the merger.  It was effectively too late at trial, or after the government had started proceedings, for Bazaarvoice to start identifying more competitors or describing as ‘competitive strengths’ points that had previously been described as ‘barriers to entry’.  The lack of supporting pre-acquisition documents clearly undermined Bazaarvoice’s defence.

The Court accepted that Bazaarvoice’s ultimate goal of its purchase of PowerReviews may have been to compete more effectively in a broader ‘big data’ or social commerce tools market, but that did not overcome the anti-competitive effects found by the Court to be likely in the distinct market for ratings and review platforms.  The Court noted that ‘[t]he lack of pre-acquisition documentary evidence supporting Bazaarvoice’s argument at trial that the elimination of its primary competitor had nothing to do with anticompetitive intent and likely effect, particularly compared with the substantial evidence of anticompetitive intent and likely effect to the contrary, was striking.  The anticompetitive rationale for the acquisition remained constant in board presentations throughout the negotiation process, and it underlies many of the documents and much of the testimony that Bazaarvoice relied on at trial'”.

For the complete note see: Compliance Alert: The Importance of Managing Document Creation: Update on Bazaarvoice/PowerReviews Transaction.

____________________

SERVICES AND CONTACT

I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law.  I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

My experience includes advising clients in Toronto, Canada and the US on the application of Canadian competition and regulatory laws and I have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal, pricing and distribution, Investment Canada Act and merger matters. For more information about my competition and advertising law services see: competition law services.

To contact me about a potential legal matter, see: contact

For more regulatory law updates follow me on Twitter: @CanadaAttorney

Comments are closed.