Blackboard's WebCT Deal Spurs Antitrust Questioning
Saturday, November 26, 2005
A deal by educational software company Blackboard Inc. to buy its chief competitor has raised questions from antitrust experts at the Justice Department.
District-based Blackboard and the competitor, privately owned WebCT Inc., each has received two requests for information from the Justice Department, Blackboard said in a filing Wednesday with the Securities and Exchange Commission.
In the filing, Blackboard said the second round of questions will extend the waiting period required for antitrust review. The company did not say whether it will delay completion of the merger, which the two companies hoped would occur by late this year or early 2006. Officials at Blackboard could not be reached for comment yesterday.
Federal antitrust scrutiny of the merger was expected because together the two companies would dominate the small but growing market for course-management software used by secondary schools and universities. Blackboard is the biggest seller of the software used to manage a variety of school-student interactions online. Its products can be used by professors to post course materials and by campus cafeterias to track how much students are eating under meal plans.
Eduventures Inc., a Boston research firm, estimates that 45 to 50 percent of all schools that use course management software are Blackboard clients, while WebCT of Lynnfield, Mass., has about 35 to 40 percent of the market.
"I'm not shocked" that the Justice Department would ask for more time to review the merger, said John P. Campbell, associate vice president of information technology at Purdue University, a WebCT client. "But that's mainly because they will have such a large percentage of the market. I still see the course management area to be a very competitive market, even with the merger." Campbell said Canadian software firm Desire2Learn Inc. has won business from major U.S. universities, including three of the Big Ten schools.
Blackboard, which became a public company in June 2004, has predicted the deal would withstand antitrust scrutiny, despite several recent instances in which the Justice Department has defined even small software niches as markets in which one player should not have too much pricing power.
"We feel confident that we will be able to get through the regulatory process," general counsel Matthew Small told investors in a conference after the $180 million deal was announced last month. Small said that market share statistics do not "reflect the number of larger companies that have e-learning products and that are making inroads."
Shares of Blackboard closed yesterday at $28.93, down 59 cents.