CORRECTED-UPDATE 2-US Justice Dept challenges Bazaarvoice deal
(Deletes references in bullet, paragraphs 1 and 5 to government saying deal should have been reported)
* Bazaarvoice shares tumble 16 percent
* Justice Dept seeks certain divestitures by Bazaarvoice
WASHINGTON, Jan 10 (Reuters) - The U.S. Justice Department filed a lawsuit on Thursday challenging the acquisition last June by Bazaarvoice Inc of its main rival, saying that the deal reduced competition for product ratings platforms.
Shares of Bazaarvoice slumped on news of the lawsuit over its $168.2 million purchase of PowerReviews Inc, falling 15.8 percent to $7.49 on Nasdaq.
The two firms help companies use social media to advertise and also try to control any damage to clients' reputations from bad reviews. PowerReviews helped online retailers set up customer review sections on their websites so that they could compete with Amazon.com.
The Justice Department, which noted that Bazaarvoice's purchase of PowerReviews Inc has been completed, asked the court to require Bazaarvoice to divest certain assets, and by doing so create a new company to replace PowerReviews.
The companies did not report the transaction to antitrust authorities for approval.
"This lawsuit seeks to prevent one firm from dominating the product rating and review platforms market, and demonstrates that transactions that are not reported to us are not immune from scrutiny," Bill Baer, who was sworn in last week as head of the Justice Department's Antitrust Division, said in a statement.
In its complaint, the Justice Department cited a comment by Erin Defosse, Bazaarvoice's vice president of strategy, that "there really isn't a market ... it is (Bazaarvoice) or PowerReviews."
It also cited a Bazaarvoice executive as saying that he expected prices for the company's products to go up as a result of the transaction.
Bazaarvoice's 700 clients include Panasonic, Burpee, Timex, Infiniti and Macy's, according to its website. The Austin, Texas, based company had no immediate comment on the complaint.
Bazaarvoice went public last February at $12 a share, and began trade at $16 in its market debut on the Nasdaq on Feb. 24, 2012.
The Justice Department, in its complaint, also seeks to have Bazaarvoice pay the government's costs in bringing the lawsuit.
The case was filed in the U.S. District Court for the Northern District of California. It is No. 13-0133. (Reporting by David Ingram, Diane Bartz and Alistair Barr; Editing by Gary Hill, Peter Galloway, Leslie Adler and Bob Burgdorfer)