Justice Department Looks Into Blackboard's Angel Acquisition

• By David Nagel
• 05/26/09

[Updated May 27 at 2:43 p.m.]

The United States Department of Justice is apparently taking an interest in Blackboard's recent acquisition of Angel Learning. DOJ has been asking questions about the controversial buyout, according to Blackboard's chief rival in the commercial LMS space, Desire2Learn.

Blackboard bought Angel Learning this month for $95 million in cash and stock. Although Blackboard promised ongoing support and development for Angel customers, the announcement was met with considerable concern from the Angel user community--ranging from mere nervousness about competition in the market to outright anger. (Some comments can be viewed here.)

Information about the DOJ investigation is a bit scant at present. We spoke with Diane Lank, Desire2Learn's general counsel, who informed us that DOJ had made information requests to the company about the Blackboard/Angel deal, but those questions she characterized as "generic," having to do with topics like market share (of which Blackboard owns the vast majority among commercial LMS providers in education).

She said the questions started coming in as early as May 14, the very day Blackboard CEO Michael Chasen was addressing attendees at the Angel user conference. She said Desire2Learn didn't reveal this information at the time because the company thought the investigation was confidential.

"All I can tell you is we received an inquiry from the Department of Justice," Lank said in a phone interview. "... [W]e were first informed on May 14 that they had opened an official investigation. But we thought that that was confidential." However, she said, following another conversation with the DOJ Tuesday, it was made clear that the investigation was not confidential.

Blackboard had not made any comments publicly or to shareholders between May 14 and May 26, when we requested further information about the investigation. (The company has since informed shareholders of the DOJ's scrutiny, filing information with the Securities and Exchange Commission May 27.) Blackboard told us that it received an inquiry May 22 from the DOJ, which would place it considerably later than the inquiry received by Desire2Learn.

Blackboard's Mathew Small, chief business officer, issued a prepared statement commenting on the DOJ investigation late this afternoon.

"Blackboard is providing information to the Department of Justice on a voluntary basis regarding the Angel Learning transaction in response to an inquiry received on May 22," Small wrote. "The industry is as vibrant as it has ever been and we are confident that the Angel transaction was compliant with all relevant antitrust requirements. There is no impact whatsoever on either Angel or Blackboard clients who will continue to be served by the newly combined company."

According to Blackboard's own statistics, the company has approximately 5,800 K-12 schools, higher education institutions, government organizations, and private companies as clients of its LMS software and commerce and security offerings. In terms of education alone, as of about a year ago, Blackboard claimed between 70 percent and 80 percent of the higher education market in the United States and about 400 K-12 clients.

We will keep you updated with further information as it becomes available.