WASHINGTON — Federal regulators stepped up their scrutiny of Blockbuster Inc.'s proposed takeover of Hollywood Entertainment Corp. on Friday, saying the video rental giant failed to provide complete and accurate information needed to evaluate whether the deal would comply with antitrust laws.
The Federal Trade Commission, one of two government agencies with oversight over major business mergers, asked U.S. District Court in Washington to bar Blockbuster from moving forward with the acquisition until it complied with the agency's request for data.
Blockbuster valued its bid at $1.3 billion, including $350 million in debt it would inherit.
Blockbuster, the nation's top movie renter, blamed a computer programming error for initially providing inaccurate information on rental prices at its stores, the FTC said in its court filing. The agency is not alleging Blockbuster intentionally provided the inaccurate data.
Company spokesman Randy Hargrove said Blockbuster had since provided more detailed data and would not back down from pursing its proposed acquisition of Hollywood Entertainment, based in Wilsonville, Ore.
"We have provided them with hundreds of boxes of information.... I think they are simply trying to forestall having any hearing on the merits" of this proposed acquisition, Hargrove said, calling the FTC's court action "a diversionary tactic."
Antitrust experts said it was rare for the agency to seek a court order to compel a company to provide more information. FTC officials had been exchanging letters, e-mails and phone calls with Blockbuster for two months until company Vice President Judy C. Norris told the FTC in February that Blockbuster believed it had "substantially complied" with the FTC's request for information. That response prompted the FTC's court filing Friday.
"Usually this indicates the FTC is thinking real seriously of a challenge or will be seeking substantially more time to evaluate a deal," said Robert H. Lande, an antitrust expert and law professor at the University of Baltimore in Maryland.
The FTC typically has 30 days to conduct a preliminary investigation. But that deadline can grow with requests for additional information, an FTC spokeswoman said.
Dallas-based Blockbuster has argued that the emergence of such competitors on the Internet as Netflix Inc. had diversified the marketplace and should remove antitrust concerns.
Blockbuster has offered $14.50 a share in cash and stock for Hollywood. Movie Gallery Inc. of Dothan, Ala., has offered $13.25 in cash.
Shares of Blockbuster fell 8 cents to $8.67 on the New York Stock Exchange. Hollywood Entertainment rose 30 cents to $14.06 on Nasdaq.