SAN FRANCISCO — Trading unvarnished emails before acquiring an industry rival, Bazaarvoice executives unwittingly handed the government damaging pieces of evidence.
The company’s former CEO, Brett Hurt, took the stand on Tuesday to try to take them back.
A bench trial began this week in the courtroom of U.S. District Judge William Orrick III over Bazaarvoice’s 2012 acquisition of fellow social commerce company PowerReviews for $168 million. The U.S. Department of Justice, which claims the union wiped out competition in the market for online product ratings and reviews, is seeking to break up the company.
Bazaarvoice insists that it still wrestles with plenty of competitors. But the DOJ says emails exchanged by the company’s leaders prove just the opposite.
The case is being closely watched in Silicon Valley because it threatens to upend a deal most expected to fly under the DOJ’s radar.
Delving into Hurt’s correspondence on the second day of trial, government lawyer Peter Huston read from an email in which the executive wrote that the acquisition of PowerReviews would leave Bazaarvoice with “no meaningful direct competitor.”
Hurt tried to distance himself from the email, claiming it was written by another Bazaarvoice manager and he did not review the message before sending it to the board.
“I just cut and pasted,” said Hurt. “A board knows that a CEO is sending 300-plus emails a day.”
Huston seemed skeptical.
“So when the board gets something from you and only you they can take no comfort that you, as CEO, have reviewed it and adopted it?” asked Huston, assistant chief of the Antitrust Division in San Francisco.
Hurt said the prospect of knocking out a competitor did not ultimately sway board members, who felt that new entrants would emerge to fill the gap.
“The board just didn’t buy this argument at all,” Hurt said. “The winning argument was more about how we would be able to build the long-term business.”
Huston pointed to other emails exchanged by Bazaarvoice executives to illustrate how frustrated they had become with PowerReviews’ tactics. In a message to board member Mitchell Green of Eastern Advisors, Hurt wrote that PowerReviews forced Bazaarvoice to offer a “material” discount to win one customer’s business.
“You should share that with board,” Green wrote, according to the trial exhibit. “Just buy ‘em ;-)”
When it was his turn to question Hurt, Bazaarvoice’s lead lawyer Boris Feldman of Wilson Sonsini Goodrich & Rosati gave the executive a chance to explain how the company managed to win new customers like Walmart despite the fact that PowerReviews often offered its services for free. Hurt said he convinced the company that Bazaarvoice would be a partner for the long haul.
“It was really a defining moment for our company,” Hurt said. “I was able to convince them that they should pay for the value that we were providing.”
Hurt, who is now vice chairman of Bazaarvoice’s board, remained composed throughout his testimony, though it was his first time in court. Following his cross examination, Hurt stood up to leave, though Huston had yet to question him again.
“No, no, you don’t get to go yet,” Feldman quipped. “This is the rematch.”
PowerReviews’ former CEO, Pehr Luedtke, also testified Tuesday. DOJ lawyer Michael Bonanno pulled up a PowerPoint that Luedtke prepared to push for the merger. Luedtke wrote in the document that the deal would create a “barrier to entry for sub-scale firms.”
Luedtke told Bonanno that he meant to express that the trust and credibility the combined company would have in the marketplace would be tough to compete with.
“You went to Stanford Business School,” Bonanno said. “You probably discussed what barrier to entry was.”
Luedtke insisted the term has acquired a second meaning in corporate parlance.
“I didn’t mean to imply in the manner of…an antitrust lawyer that there would be a barrier to entry,” he said.
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