Speech Technology Magazine

Nuance Under Antitrust Investigation

The U.S. Justice Department has confirmed that it is looking into Nuance's acquisition of Philips Speech Recognition.
By Eric Barkin - Posted Aug 27, 2009
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The U.S. Department of Justice has confirmed that it is conducting an antitrust investigation of Nuance Communications.

The investigation is looking at Nuance’s acquisition of Philips Speech Recognition Systems from Royal Philips Electronics for $96.1 million in October 2008. 

There has been concern since the purchase that Nuance has essentially taken control of the world’s medical transcription market. It already dominated the field in the United States, and with Philips, which had a very strong foothold in Europe, it was said to have seized that market as well.

During its history, Nuance has had a robust acquisitions strategy, acquiring a number of competitors. Since 2006 alone, it has swallowed as many as 15 companies, including Dictaphone, a major medical transcription player for which it paid $357 million; eScription, another medical transcription firm for which it paid $340 million; and Jott Networks, the Seattle-based provider of mobile voice-to-text applications (see related story at right). 

Nuance’s acquisitions, which have sometimes been preceded by submitting target companies to legal action for alleged patent infringements, have been the subject of complaints from some of its competitors. Whether these complaints spurred the Justice Department to begin the investigation is, as of yet, unclear.

Gina Talamona, a Justice Department spokesperson, would only confirm that the investigation is ongoing, and that it relates to the acquisition of Philips Speech. The department declined to comment on whether the investigation had spread or would be spreading beyond the scope of the Philips acquisition or Nuance’s medical transcription business. 

In a December 2008 email obtained by Speech Technology, and sent by Peter Preziosi, CEO of the Medical Transcription Industry Association (MTIA), to MTIA’s board and others, Preziosi said he took part in a meeting called by Justice Department lawyers and economists, who were investigating whether “recent acquisition activity of Nuance constituted a monopoly within the [medical transcription sector].”

According to the email, Preziosi’s comments “focused mainly on the interconnectedness of the dictation/transcription process to patient care delivery and the healthcare reimbursement system.” 

He claimed that while the Justice Department had general familiarity from an economic, policy, and technology perspective, it had little if any knowledge of how the transcription sector operates specifically. 

Preziosi explains in an interview that “the biggest challenge is trying to define what that marketplace looks like, because it’s evolving so much with new enabling technologies coming into the marketplace.”

Since December, the Justice Department has spoken to a number of figures in the speech industry, far outside the confines of just medical transcription or Nuance. It’s not known, however, if this means that the investigation’s scope has widened beyond Nuance’s acquisition of Philips, or if the Justice Department is inquiring to get a handle on the speech technology space in its search.

In most cases, the Justice Department begins its investigations before an acquisition is finalized. However, at the time of the deal it did not deem them necessary.

Accounting for this, Richard Mack, a Nuance spokesman, told Bloomberg, Philips had “just a few million dollars of business in the United States.

“[Philips] was not a significant competitor to Nuance or any other U.S.-based speech recognition company,” he added. “We do not see how anyone could think this combination reduces competition anywhere.”  

That said, revenue in Nuance’s healthcare unit have been significant. In October 2008, Tom Beaudoin, Nuance’s chief financial officer, stated that Nuance’s healthcare business would deliver worldwide revenue in excess of $410 million in fiscal year 2009. In the second quarter, Nuance’s revenue in healthcare totaled $105.2 million, up 32 percent from the same time last year.

The Justice Department’s investigation has been ongoing for several months; Nuance says that it has been cooperating with the government since late 2008.

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