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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential attorney-client communication and attorney work product. It was prepared by Calderwood & Harkness LLP at the direction of counsel in anticipation of litigation and for the purpose of providing legal advice in connection with the U.S. Department of Justice Antitrust Division's review of the proposed acquisition of NovaMart Global Inc. by Cascade Retail Holdings Inc. under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a. This memorandum is protected from disclosure by the attorney-client privilege, the work product doctrine, and any other applicable privilege or protection. No part of this memorandum may be disclosed to any person or entity other than the named recipients without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any privilege or protection.

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, NY 10022 Tel: (212) 555-7800

Fax: (212) 555-7801

July 1, 2025

MEMORANDUM

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I. Introduction and Purpose

This memorandum summarizes the principal findings and conclusions of the economic expert report (the "Report") prepared by Dr. Henrik Johansson, Professor of Economics at Georgetown University and Senior Consultant at Apex Economics LLC, 900 G Street NW, Suite 700, Washington, DC 20001. The Report was completed on June 27, 2025 and delivered to Calderwood & Harkness LLP on that date.

Dr. Johansson was retained by Calderwood & Harkness LLP ("C&H"), acting as outside antitrust counsel to Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Company," Nasdaq: CRHI), in connection with the antitrust review of Cascade's proposed acquisition of 100% of the outstanding capital stock of NovaMart Global Inc. ("NovaMart" or the "Target") for an aggregate purchase price of $1,200,000,000 in cash (the "Transaction" or the "Proposed Acquisition"). The Stock Purchase Agreement governing the Transaction was executed on May 20, 2025 by and among Cascade, NovaMart, and the Selling Stockholders (as defined below).

As the recipients of this memorandum are aware, the parties submitted their pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, on April 11, 2025 (internal tracking number 1038-00009). The applicable filing fee of $2,390,000 was paid at the time of filing. The initial 30-day HSR waiting period would have expired on May 11, 2025. However, on May 8, 2025, the Antitrust Division of the U.S. Department of Justice (the "DOJ" or the "Division") issued a Request for Additional Information and Documentary Material (the "Second Request"), thereby extending the waiting period until thirty days after the parties achieve substantial compliance with the Second Request.

The purpose of the Report, and of this memorandum summarizing it, is to support the comprehensive advocacy submission — commonly referred to as the "White Paper" — that Calderwood & Harkness LLP and Whitfield & Crane LLP (Gabriela Montoya, Partner) are preparing for submission to the DOJ Antitrust Division. The White Paper will argue that the Proposed Acquisition does not substantially lessen competition in any relevant market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. § 18, and that the Transaction should be cleared without conditions. Dr. Johansson's Report provides the economic foundation for that advocacy.

This memorandum is intended to provide the deal team and the Company's legal and business leadership with a detailed but accessible summary of the Report's key analyses, methodologies, and conclusions. The full Report, together with its appendices and supporting technical materials, has been provided separately under the same privilege protections. This memorandum should be read in conjunction with the full Report and should not be treated as a substitute for it.

II. Expert Qualifications

Dr. Henrik Johansson is a Professor of Economics at Georgetown University, where he has held a tenured faculty appointment since 2009. He received his Ph.D. in Economics from the Massachusetts Institute of Technology in 2003 and his B.A. in Economics (summa cum laude) from the University of Chicago in 1997. Dr. Johansson's areas of academic specialization include industrial organization, antitrust economics, empirical market analysis, and the economics of platform markets. He has published extensively in leading peer-reviewed economics journals, including the American Economic Review, the RAND Journal of Economics, the Journal of Industrial Economics, and the International Journal of Industrial Organization, among others.

In addition to his academic career, Dr. Johansson serves as a Senior Consultant at Apex Economics LLC, a boutique economic consulting firm headquartered in Washington, D.C. that specializes in antitrust, competition policy, and regulatory economics. Apex Economics has been involved in some of the most significant merger review proceedings of the past decade, advising both merging parties and government agencies.

Dr. Johansson has an extensive track record as both a consulting and testifying expert in merger review proceedings. He has been retained as an economic expert in more than forty matters before the DOJ Antitrust Division and the Federal Trade Commission ("FTC"), and has provided expert testimony in federal court in connection with merger challenges and private antitrust litigation. His prior engagements include matters involving online platforms, retail markets, consumer goods distribution, and technology-driven marketplaces. A complete list of Dr. Johansson's prior engagements and testimony, along with his full curriculum vitae, is provided in Appendix A to the Report.

Dr. Johansson's engagement in connection with the Proposed Acquisition was coordinated through Howard Bellamy at Calderwood & Harkness LLP and Gabriela Montoya at Whitfield & Crane LLP. His work has been conducted at the direction of counsel and under the protection of the attorney-client privilege and the work product doctrine.

III. Transaction Overview (As Presented in the Report)

The Report provides a detailed overview of the Transaction and the parties, which is summarized below.

A. The Buyer

Cascade Retail Holdings Inc. is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. Cascade is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. Cascade is a diversified omnichannel retailer that operates over 380 brick-and-mortar retail locations across North America, spanning the United States and Canada, as well as a proprietary ecommerce platform, CascadeDirect.com, which serves approximately 28 million active registered customers. Cascade's retail operations encompass a broad range of consumer products, including apparel, home goods, consumer electronics, sporting goods, and specialty items.

For the fiscal year ended January 31, 2025 ("FY2024"), Cascade reported total revenues of approximately $14.7 billion and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $1.83 billion. As of May 19, 2025 — the last trading day prior to the execution of the Stock Purchase Agreement — Cascade's market capitalization was approximately $22.4 billion. CascadeDirect.com has evolved in recent years from a purely first-party ecommerce operation (in which Cascade itself sources, holds, and sells inventory) to a hybrid model that includes a third-party marketplace function through which independent sellers can list and sell products directly to consumers on the CascadeDirect.com platform. The marketplace function was launched in October 2022 and has been growing steadily, although it remains a relatively small component of Cascade's overall revenue.

B. The Target

NovaMart Global Inc. is a Delaware corporation that is privately held. NovaMart is headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart is one of the largest independent online marketplace platforms in the United States dedicated to the sale of specialty consumer goods, including home décor, artisanal products, handcrafted items, boutique fashion accessories, and consumer electronics accessories. Unlike Cascade, NovaMart operates exclusively as an online platform and does not maintain any physical retail presence.

For FY2024, NovaMart reported total revenues of approximately $891 million and EBITDA of approximately $134 million. NovaMart's gross merchandise volume ("GMV") — the total value of merchandise sold through its platform — was approximately $6.2 billion in FY2024. The platform hosts approximately 62,400 active sellers and has approximately 9.1 million registered buyers. NovaMart generates revenue primarily through (i) commission fees charged to sellers on each completed transaction ("take rates"), (ii) advertising revenue from sellers and third-party advertisers, and (iii) fees for premium seller services, including enhanced product placement, analytics tools, and fulfillment services.

NovaMart operates a proprietary logistics and fulfillment network branded "NovaShip," which consists of 14 fulfillment centers distributed across 9 states: California (3 facilities), New Jersey (2 facilities), Georgia (2 facilities), Florida (2 facilities), Ohio (1 facility), Illinois (1 facility), Pennsylvania (1 facility), Tennessee (1 facility), and Washington (1 facility). The NovaShip network enables NovaMart to offer competitive delivery speeds to the majority of the U.S. population, with standard delivery times of two to four business days for most orders. NovaMart also utilizes third-party logistics providers, including Redline Freight Corp., for overflow capacity and last-mile delivery.

C. Transaction Structure and Consideration

The Transaction is structured as a 100% stock purchase in which Cascade will acquire all of the outstanding capital stock of NovaMart for an aggregate all-cash purchase price of $1,200,000,000. The Transaction does not include any earnout, contingent consideration, or stock component. The purchase price implies an enterprise value of approximately $1.2 billion, translating to the following valuation multiples:

• EV/EBITDA: Approximately 8.96x ($1,200,000,000 ÷ $134,000,000)

• EV/Revenue: Approximately 1.35x ($1,200,000,000 ÷ $891,000,000)

These multiples are consistent with precedent transactions in the online marketplace and specialty ecommerce space, reflecting NovaMart's strong seller base, growing GMV trajectory, and the strategic value of its NovaShip fulfillment infrastructure.

D. Selling Stockholders

The selling stockholders in the Transaction and their respective ownership interests in NovaMart are as follows:

Ridgeline Equity Partners, LP and Brindoval Ventures Fund III, LP are the institutional investors in NovaMart and collectively hold a majority of the outstanding capital stock. Julian Reeves and Priya Narasimhan are the co-founders of NovaMart and have served as Chief Executive Officer and Chief Technology Officer, respectively, since the company's founding in 2014.

E. Strategic Rationale

The Report notes that the stated strategic rationale for the Transaction, as articulated by Cascade's management and board of directors, is to extend Cascade's reach into the third-party marketplace segment and to integrate NovaMart's curated seller base and buyer community into Cascade's existing omnichannel retail platform. Specifically, Cascade seeks to leverage NovaMart's marketplace expertise, technology platform, and NovaShip fulfillment network to accelerate the growth of Cascade's own third-party marketplace function on CascadeDirect.com, to offer Cascade's 28 million active online customers access to a broader selection of specialty consumer goods, and to provide NovaMart's 62,400 active sellers with access to Cascade's significantly larger customer base and physical retail footprint. The combination of the two companies' complementary capabilities is expected to create a more competitive and differentiated omnichannel offering that benefits both sellers and buyers.

IV. Scope of the Economic Analysis

Dr. Johansson's Report addresses the full range of economic issues relevant to the DOJ's review of the Proposed Acquisition under Section 7 of the Clayton Act. Specifically, Dr. Johansson was asked to analyze the following:

(a) The appropriate relevant product market or markets in which to evaluate the competitive effects of the Transaction;

(b) The appropriate relevant geographic market or markets;

(c) The competitive effects of the Proposed Acquisition, including an analysis of market concentration using the Herfindahl-Hirschman Index ("HHI");

(d) A merger simulation model predicting the likely post-merger pricing effects of the Transaction;

(e) The conditions of entry into and expansion within the relevant market, including whether entry would be timely, likely, and sufficient to counteract any potential anticompetitive effect;

(f) The efficiencies likely to result from the Transaction, including whether such efficiencies are merger-specific and verifiable, and the extent to which they are likely to be passed through to consumers; and

(g) The ultimate question of whether the Transaction is likely to substantially lessen competition in any relevant market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. § 18.

In conducting his analysis, Dr. Johansson reviewed and relied upon a wide range of data sources and materials, including the following:

• Publicly available industry data, including market reports published by leading industry research firms covering the online marketplace and specialty ecommerce sectors;

• Internal Cascade and NovaMart business documents, including strategic plans, business reviews, board presentations, financial projections, customer and seller data, and competitive analyses, produced through the clean team process governed by the Clean Team / Antitrust Protocol Agreement dated February 18, 2025 (the "Clean Team Agreement");

• Third-party market reports and analyses from independent research firms, including reports on online marketplace GMV, seller and buyer demographics, and competitive dynamics;

• SEC filings for Cascade (10-K, 10-Q, proxy statements, and other public filings) and comparable public companies;

• GMV data, revenue data, take-rate data, seller counts, buyer counts, and transaction volume data from Cascade and NovaMart, provided through the clean team process;

• Data on competing marketplace platforms, including publicly available financial and operational data for BrightBazaar Inc. and other identified competitors;

• Seller surveys and buyer switching behavior data collected by NovaMart in the ordinary course of business and produced under the Clean Team Agreement; and

• Information produced by Cascade and NovaMart in response to the DOJ's Second Request, to the extent available at the time of the Report's preparation and accessible through the clean team process.

Dr. Johansson's methodology is grounded in well-established principles of antitrust economics and is consistent with the framework set forth in the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (2023) (the "Merger Guidelines"). The technical details of Dr. Johansson's methodology are set forth in Appendix B to the Report.

V. Relevant Product Market Definition

A. Analytical Framework

Dr. Johansson's analysis of the relevant product market follows the standard framework established by the Merger Guidelines and widely accepted in antitrust economics. The cornerstone of this framework is the hypothetical monopolist test, also known as the "SSNIP test" (Small but Significant and Non-transitory Increase in Price). Under this test, the relevant product market is defined as the smallest group of products such that a hypothetical profit-maximizing monopolist controlling all of the products in the group would find it profitable to impose a small but significant and non-transitory increase in price — typically defined as a 5% increase — on at least one product in the group.

The hypothetical monopolist test is applied by considering two primary forms of substitution. First, demand-side substitution examines whether customers (in this case, both sellers and buyers on marketplace platforms) would switch to alternative products or platforms in response to a price increase, such that the price increase would be unprofitable for the hypothetical monopolist. Second, supply-side substitution examines whether firms not currently producing the relevant product could quickly and economically reposition their operations to begin offering the relevant product in response to a price increase, thereby constraining the hypothetical monopolist's pricing power. Both forms of substitution are considered in defining the boundaries of the relevant product market.

Dr. Johansson notes that in the context of online marketplace platforms, the "price" relevant to the SSNIP analysis is the take rate — that is, the commission rate and associated fees charged by the platform to sellers on each completed transaction — rather than the price of the underlying goods sold on the platform. This approach is consistent with the treatment of platform markets in recent DOJ and FTC practice and in economic literature on two-sided platform markets.

B. Proposed Relevant Product Market: Online Marketplace Platforms for Specialty Consumer Goods

Based on his application of the hypothetical monopolist test and his review of the evidence, Dr. Johansson defines the relevant product market as "online marketplace platforms for specialty consumer goods." This market encompasses third-party seller marketplace platforms that facilitate the sale of specialty consumer goods, including but not limited to home décor, artisanal and handcrafted products, boutique fashion accessories, and consumer electronics accessories, through a curated online marketplace in which independent sellers list and sell their products directly to consumers.

This market definition is intended to capture the core area of competitive overlap between Cascade's CascadeDirect.com marketplace function and NovaMart's marketplace platform. Both platforms serve as intermediaries connecting sellers of specialty consumer goods with consumers seeking those products, and both derive revenue primarily from take rates, advertising, and seller services.

Dr. Johansson carefully distinguishes this market from several adjacent but distinct categories of economic activity:

(i) General online retail (first-party ecommerce): Traditional ecommerce operations in which a retailer sources, holds inventory of, and sells its own products directly to consumers (e.g., a retailer selling its own merchandise through its website). While Cascade's CascadeDirect.com platform does include a significant first-party retail component, the relevant market for purposes of this analysis is limited to the third-party marketplace function in which independent sellers list and sell their products.

(ii) General-purpose online marketplaces: Broad-based online marketplace platforms that facilitate transactions across a wide range of product categories without a particular focus on specialty or niche consumer goods. While there may be some degree of overlap in product categories, Dr. Johansson's analysis indicates that sellers and buyers on specialty marketplace platforms view those platforms as distinct from general-purpose platforms due to differences in curation, seller community, buyer demographics, platform features, and brand identity.

(iii) Brick-and-mortar retail: Physical retail stores, including specialty retailers, that sell consumer goods through in-person transactions. While brick-and-mortar retailers may sell some of the same types of products available on specialty marketplace platforms, the evidence indicates that the online marketplace channel is sufficiently distinct — in terms of seller and buyer behavior, platform functionality, geographic reach, and competitive dynamics — to constitute a separate relevant market.

(iv) Social commerce and social media selling platforms: Platforms such as social media networks that have introduced shopping features enabling users to buy and sell products. While social commerce is a growing segment, Dr. Johansson's analysis indicates that it does not currently represent a close substitute for dedicated specialty marketplace platforms, due to differences in search functionality, product curation, seller tools, fulfillment infrastructure, and buyer trust and purchasing behavior.

Cascade's CascadeDirect.com platform operates both as a first-party retailer (selling Cascade's own inventory) and, since October 2022, as a third-party marketplace enabling independent sellers to list and sell products on the platform. The third-party marketplace function of CascadeDirect.com has significant overlap with NovaMart in the specialty consumer goods segment, as Cascade has actively recruited sellers of home décor, artisanal products, and consumer electronics accessories to its marketplace. NovaMart, for its part, operates primarily and almost exclusively as a third-party marketplace with a curated focus on specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.

C. Demand-Side Substitution Analysis

Dr. Johansson's demand-side substitution analysis relies on multiple categories of evidence to establish the boundaries of the relevant product market.

Seller-Side Substitution. The Report presents evidence that sellers on specialty marketplace platforms view those platforms as distinct from general-purpose ecommerce channels and that switching from a specialty platform to a non-specialized platform involves significant costs and competitive disadvantages. This evidence includes:

• Seller surveys: NovaMart's internal seller satisfaction surveys, conducted in the ordinary course of business in 2023 and 2024 and produced through the clean team process, indicate that a substantial majority of NovaMart's active sellers identified the platform's curation and specialty focus as the primary reason for choosing to sell on NovaMart, and that fewer than 12% of sellers reported that they would switch to a general-purpose online marketplace in response to a moderate increase in NovaMart's take rate.

• Switching-cost analysis: Dr. Johansson conducted a switching-cost analysis based on seller transactional data and found that the costs of moving from a specialty marketplace platform to a non-specialized platform include (i) loss of access to a targeted buyer community, (ii) reduced product visibility due to lack of curation, (iii) the need to invest in new seller tools and listing optimization for a different platform, and (iv) the cost of rebuilding seller reputation and ratings on a new platform. These switching costs are non-trivial and tend to lock sellers into the specialty marketplace channel.

• Multi-homing evidence: While many sellers on NovaMart also sell on other platforms (a practice known as "multi-homing"), the evidence indicates that multi-homing is more common between specialty marketplace platforms than between specialty platforms and general-purpose platforms, further supporting the conclusion that specialty marketplaces constitute a distinct market.

Buyer-Side Substitution. The Report also presents evidence that buyers seeking specialty consumer goods treat curated marketplace platforms as differentiated from mass-market general retail, both online and brick-and-mortar:

• Buyer behavior data: Analysis of NovaMart's transactional data and user analytics indicates that buyers on NovaMart are motivated by the platform's curation, product uniqueness, and the ability to discover artisanal and specialty products not readily available on general-purpose platforms. Buyer conversion rates and repeat purchase rates on NovaMart are significantly higher than industry averages for general-purpose ecommerce, suggesting a high degree of buyer loyalty to the specialty marketplace format.

• Cross-elasticity analysis: Dr. Johansson estimated the cross-price elasticity of demand between NovaMart's marketplace and general-purpose online platforms and found that it is relatively low, indicating that an increase in NovaMart's take rate (which could be passed through to buyers in the form of higher product prices) would not drive a significant shift in buyer demand to general-purpose platforms.

D. Supply-Side Substitution Analysis

Dr. Johansson also assessed whether supply-side substitution — the ability of firms not currently operating specialty marketplace platforms to quickly and economically reposition into the relevant market — warrants broadening the market definition. His conclusion is that while barriers to entry are relatively low in absolute terms (as discussed in Section X below), the repositioning of a general-purpose online platform or a brick-and-mortar retailer to serve the specialty consumer goods marketplace segment is neither instantaneous nor costless. Building a curated seller community, developing specialized search and recommendation algorithms, and establishing the brand identity and buyer trust associated with a specialty marketplace all require significant time and investment. Accordingly, supply-side substitution does not justify broadening the relevant product market beyond specialty consumer goods marketplace platforms.

E. DOJ's Potential Broader Market Definition

Dr. Johansson acknowledges that the DOJ may consider defining the relevant product market more broadly than "online marketplace platforms for specialty consumer goods." Possible broader market definitions that the DOJ might advance include "all online marketplace platforms" (encompassing both specialty and general-purpose platforms) or "all ecommerce retail" (encompassing both marketplace and first-party retail). The Report addresses these alternative market definitions and demonstrates that, even under the broadest plausible market definition, the competitive analysis supports clearance of the Transaction. As discussed in Sections VII and VIII below, under any broader market definition, Cascade's and NovaMart's combined market shares would be even smaller, the HHI levels even lower, and the competitive effects even more attenuated than under the specialty marketplace definition that Dr. Johansson considers most appropriate.

VI. Relevant Geographic Market Definition

Dr. Johansson concludes that the relevant geographic market for the analysis of the Proposed Acquisition is the United States (nationwide).

This conclusion is based on several factors. First, both Cascade and NovaMart serve customers throughout the United States. NovaMart's online marketplace platform is accessible to buyers in all 50 states and the District of Columbia, and its 14 NovaShip fulfillment centers are strategically distributed across 9 states — California (3), New Jersey (2), Georgia (2), Florida (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), and Washington (1) — to enable efficient nationwide delivery. NovaMart's standard delivery window of two to four business days covers the vast majority of the U.S. population.

Second, Cascade's CascadeDirect.com platform serves approximately 28 million active registered customers located across the United States. In addition, Cascade's network of over 380 brick-and-mortar retail locations spans North America, with stores in 44 U.S. states and 6 Canadian provinces. The CascadeDirect.com marketplace function is available to buyers nationwide, regardless of proximity to a physical Cascade store.

Third, the nature of online marketplace platforms inherently supports a nationwide geographic market. Unlike brick-and-mortar retail, where geographic proximity between the consumer and the store is a critical determinant of competition, online marketplace platforms connect sellers and buyers across geographic boundaries. Sellers on NovaMart and CascadeDirect.com can ship products to customers anywhere in the country, and buyers can browse and purchase from sellers located in any state.

Fourth, Dr. Johansson found no evidence of meaningful regional sub-markets within the United States for online marketplace platforms for specialty consumer goods. Pricing (take rates), seller terms, and buyer access do not vary by region on either NovaMart or CascadeDirect.com. Competitive conditions are substantially uniform across the country.

For these reasons, Dr. Johansson defines the relevant geographic market as the United States, consistent with the treatment of online marketplace platforms in prior DOJ and FTC merger investigations.

VII. Market Participants and Market Share Analysis

A. Identification of Market Participants

Based on his analysis of the relevant product and geographic markets, Dr. Johansson identifies the following key participants in the market for online marketplace platforms for specialty consumer goods in the United States:

1. Cascade Retail Holdings Inc. (CascadeDirect.com marketplace function): As described above, Cascade operates a third-party marketplace on CascadeDirect.com that enables independent sellers to list and sell specialty consumer goods, home décor, artisanal products, and consumer electronics accessories. The marketplace function was launched in October 2022 and has been growing steadily but remains a relatively modest component of Cascade's overall operations.

2. NovaMart Global Inc.: NovaMart is one of the largest independent online marketplace platforms in the U.S. dedicated to specialty consumer goods, with approximately 62,400 active sellers and 9.1 million registered buyers, and FY2024 GMV of approximately $6.2 billion.

3. BrightBazaar Inc.: BrightBazaar is identified in the Report as the next-largest competitor to NovaMart in the specialty consumer goods marketplace segment. BrightBazaar is a publicly traded online marketplace platform that focuses on curated home décor, lifestyle products, and artisanal goods. BrightBazaar has experienced rapid growth in recent years and is itself a relatively recent entrant into the specialty consumer goods marketplace space, having launched its current marketplace model approximately four years ago.

4. Other competitors: The remaining market share is distributed among numerous other marketplace platforms and niche specialty ecommerce platforms. These include range smaller curated marketplaces focused on specific product categories (e.g., handcrafted goods, vintage items, boutique electronics accessories), as well as certain hybrid platforms that operate both as first-party retailers and third-party marketplaces with specialty consumer goods components. Dr. Johansson describes these competitors generically by category rather than naming each one individually, in order to protect commercially sensitive data, but notes that the aggregate share held by these participants is substantial, reflecting the highly fragmented nature of the market.

B. Market Share Estimates (Based on U.S. Online Specialty Consumer Goods GMV)

Dr. Johansson estimates market shares in the relevant market based on the gross merchandise volume (GMV) of specialty consumer goods sold through online marketplace platforms in the United States. GMV is the most appropriate measure of market share in this context because it captures the total value of transactions facilitated by each platform, which is the primary basis on which platforms compete for sellers and buyers. Revenue-based shares would understate the competitive significance of platforms with lower take rates and overstate the significance of platforms with higher take rates, making GMV the more reliable and commonly used metric.

The following table summarizes Dr. Johansson's market share estimates for the relevant market:

These market share estimates are based on Cascade's and C&H's internal analysis of available GMV data and were independently verified and refined by Dr. Johansson using third-party industry data, including market reports from leading ecommerce research firms, publicly available financial disclosures, and seller and transaction volume data. While precise market share figures for privately held competitors are necessarily estimates, Dr. Johansson is confident that the figures presented in the Report are reasonable and, if anything, conservative (i.e., they may slightly overstate the combined share of Cascade and NovaMart relative to the total market).

C. Key Observation

The most important takeaway from the market share analysis is that even on a combined basis, Cascade and NovaMart would account for only approximately 14.0% of the relevant market — a combined share that is well below the thresholds that have historically triggered enforcement action by the DOJ or FTC in horizontal merger cases. The market remains highly fragmented, with no single platform commanding a dominant position. BrightBazaar Inc., with approximately 6.1% share, is a vigorous and growing competitor, and the remaining approximately 79.9% of the market is shared among numerous other platforms, confirming that competition in this space is robust and multi-faceted.

Dr. Johansson emphasizes that the low combined market share is strongly indicative that the Transaction will not confer upon the combined firm the ability or incentive to exercise market power, raise take rates, reduce seller services, or otherwise act in an anticompetitive manner. The combined firm will continue to face vigorous competition from BrightBazaar and the many other participants in this dynamic and growing market.

VIII. HHI (Herfindahl-Hirschman Index) Analysis

A. Pre-Merger HHI Calculation

The Herfindahl-Hirschman Index ("HHI") is a widely used measure of market concentration that is calculated by summing the squares of the market share percentages of all firms in the relevant market. The Merger Guidelines use HHI thresholds to classify markets as unconcentrated, moderately concentrated, or highly concentrated, and to assess the potential competitive significance of a proposed merger based on both the absolute level of post-merger concentration and the change in concentration (the "delta") attributable to the transaction.

Dr. Johansson presents a detailed calculation of the pre-merger HHI in the relevant market based on the market shares of all identified participants. The individual HHI contributions of the principal market participants are as follows:

• Cascade (8.3%): 8.3² ≈ 68.9

• NovaMart (5.7%): 5.7² ≈ 32.5

• BrightBazaar Inc. (6.1%): 6.1² ≈ 37.2

• All other competitors: The remaining approximately 79.9% of the market is distributed among numerous smaller participants. Dr. Johansson estimated the individual shares of these participants based on available data and calculated their aggregate HHI contribution. Because the remaining share is distributed among a large number of competitors, each with a relatively small individual share, the aggregate HHI contribution of the "all other" category is modest.

Taking into account the contributions of all identified market participants, Dr. Johansson estimates that the pre-merger HHI is well below 1,500, placing the market squarely in the "unconcentrated" category under the Merger Guidelines. The precise pre-merger HHI calculation, with supporting share data for all identified participants, is set forth in Appendix C to the Report.

B. Post-Merger HHI Calculation

Following the Transaction, Cascade and NovaMart would be combined into a single entity with an estimated market share of approximately 14.0%. The post-merger HHI is recalculated by replacing the separate Cascade and NovaMart shares with the combined 14.0% share:

• Combined Cascade/NovaMart (14.0%): 14.0² = 196.0

• BrightBazaar Inc. (6.1%): 6.1² ≈ 37.2

• All other competitors: (unchanged from pre-merger)

The delta (change in HHI) attributable to the Transaction is calculated as:

Delta = 2 × 8.3 × 5.7 ≈ 94.6 (approximately 95 points)

This delta represents the incremental increase in market concentration resulting solely from the combination of Cascade and NovaMart. The post-merger HHI, including the contributions of all market participants, remains below 1,500.

C. Merger Guidelines Safe Harbor Analysis

The Merger Guidelines establish clear thresholds for evaluating the competitive significance of market concentration:

• Unconcentrated markets (post-merger HHI below 1,500): Mergers in unconcentrated markets are generally considered unlikely to have adverse competitive effects and ordinarily require no further analysis.

• Moderately concentrated markets (post-merger HHI between 1,500 and 2,500): Mergers producing an increase in HHI of more than 100 points in moderately concentrated markets potentially raise significant competitive concerns and often warrant scrutiny.

• Highly concentrated markets (post-merger HHI above 2,500): Mergers producing an increase in HHI of more than 100 points in highly concentrated markets are presumed likely to enhance market power, and mergers producing an increase of more than 200 points are presumed likely to enhance market power significantly.

Under these thresholds, the Proposed Acquisition falls comfortably within the safe harbor for mergers in unconcentrated markets. The post-merger HHI remains below 1,500, and the delta of approximately 95 points is below the 100-point threshold that would trigger a presumption of competitive harm even in a moderately concentrated market. Dr. Johansson concludes that the HHI analysis provides strong quantitative support for the conclusion that the Transaction is unlikely to have adverse competitive effects.

Furthermore, Dr. Johansson emphasizes that even if the DOJ were to apply a different market definition — including the broader alternative definitions discussed in Section V.E above — the HHI results would be even more favorable to clearance. Under a broader market definition encompassing "all online marketplace platforms" or "all ecommerce retail," both the pre-merger and post-merger HHI levels would be lower, the delta would be smaller, and the Transaction would fall even more clearly within the safe harbor. Dr. Johansson presents these alternative HHI calculations in Appendix C to the Report.

IX. Merger Simulation Analysis

A. Model Description

In addition to the structural market share and HHI analysis, Dr. Johansson conducted a merger simulation analysis to predict the likely post-merger pricing effects of the Transaction. Merger simulation models are a well-established tool in antitrust economics and are frequently employed by both merging parties and government agencies to estimate the competitive effects of horizontal mergers in differentiated product markets.

Dr. Johansson employs a differentiated products merger simulation model that accounts for the fact that online marketplace platforms are not homogeneous products but rather differentiated along multiple dimensions, including product selection, curation, seller services, buyer experience, take rates, and fulfillment capabilities. The model predicts the change in equilibrium take rates (the "price" of the platform's intermediation service) that would result from the combination of Cascade's and NovaMart's marketplace operations, holding all other competitive conditions constant.

The model is calibrated to observed pre-merger market conditions using the following key inputs, each of which is estimated or derived from empirical data:

B. Key Inputs

• Pre-merger take-rate margins: The model incorporates observed marketplace commission rates and advertising revenue per GMV dollar for both Cascade's CascadeDirect.com marketplace and NovaMart's marketplace. These margins were derived from internal financial data provided by both companies through the clean team process and reflect the variable profit margin that each platform earns on each dollar of GMV transacted through its marketplace.

• Diversion ratios: Diversion ratios measure the fraction of sellers (and, on the buyer side, the fraction of buyers) who would switch from one platform to another in response to a take-rate increase. Dr. Johansson estimated diversion ratios between Cascade's marketplace and NovaMart's marketplace, and between each of them and other competitors (including BrightBazaar Inc. and other platforms), based on analysis of buyer switching behavior, seller multi-homing patterns, and natural experiments involving platform fee changes. The estimated diversion ratios between Cascade and NovaMart are relatively modest, reflecting the fact that the two platforms are not each other's closest substitutes for the majority of their respective sellers and buyers.

• Demand elasticity estimates: Dr. Johansson estimated the price elasticity of demand for marketplace platform services using observed pricing variation events, including historical changes in take rates on NovaMart and CascadeDirect.com and the resulting changes in seller activity and GMV. These elasticity estimates reflect the sensitivity of sellers and buyers to changes in platform fees and are a critical input into the merger simulation model.

The model assumes Bertrand (price) competition among differentiated platforms, with each platform maximizing its own profit by setting take rates given the take rates of its competitors. This is a standard assumption in differentiated products merger simulation models and is appropriate for the marketplace platform setting, where platforms compete by setting commission rates and fee schedules.

C. Simulation Results

The merger simulation predicts de minimis post-merger price increases (take-rate increases) resulting from the Transaction. Specifically, the model estimates that the combined firm's profit-maximizing take rate would increase by less than 0.5% relative to the pre-merger equilibrium. This predicted price effect is well within the range that antitrust economists and enforcement agencies consider competitively insignificant — that is, it falls below the level at which the price increase would be likely to harm consumers or sellers to a degree that would warrant intervention.

The modest predicted price effect reflects several key features of the competitive landscape:

• The high degree of fragmentation in the relevant market, with no single platform holding a dominant position and numerous competitors collectively holding approximately 80% of the market;

• The relatively small combined share of Cascade and NovaMart (approximately 14%), which limits the combined firm's ability to raise take rates without losing sellers and buyers to competing platforms;

• The substantial competitive constraints imposed by BrightBazaar Inc. (approximately 6.1% share) and the numerous other marketplace platforms in the market, which provide sellers and buyers with ample alternatives; and

• The moderate diversion ratios between Cascade and NovaMart, indicating that the two platforms are not each other's closest substitutes and that a significant portion of any sellers or buyers lost due to a take-rate increase would divert to other competitors rather than to the merging partner.

Dr. Johansson conducted extensive sensitivity analyses varying the key parameters of the model, including demand elasticities, diversion ratios, and margin assumptions. These sensitivity analyses confirm the robustness of the central conclusion: across a wide range of reasonable parameter values, the predicted post-merger take-rate increase remains small — generally in the range of 0.2% to 0.7% — and does not approach a level that would be considered competitively significant. The full specification of the merger simulation model, including all parameter values and sensitivity analysis results, is set forth in Appendix D to the Report.

X. Entry and Expansion Analysis

A. Low Barriers to Entry

Dr. Johansson's Report includes a detailed assessment of the conditions of entry into and expansion within the relevant market for online marketplace platforms for specialty consumer goods. His conclusion is that barriers to entry are relatively low compared to traditional brick-and-mortar retail and many other industries.

This conclusion is based on several key factors:

(i) Technology availability: The technology required to develop and operate an online marketplace platform is widely available. Marketplace platform software can be developed in-house, built using open-source frameworks, or licensed from established technology providers at manageable cost. The infrastructure for hosting and scaling an online platform — including cloud computing, payment processing, and data analytics — is readily available through third-party providers (such as Pinnacle Cloud Solutions Inc. and other major cloud hosting companies) on a pay-as-you-go basis, significantly reducing the upfront capital investment required to launch a marketplace.

(ii) Seller and buyer acquisition: While building a critical mass of sellers and buyers is a necessary condition for a marketplace platform's success, the tools for acquiring sellers and buyers — including digital marketing, search engine optimization, social media advertising, content marketing, and influencer partnerships — are widely accessible and can be deployed at scale. The cost of seller and buyer acquisition in the specialty consumer goods segment, while not trivial, is manageable for firms with adequate funding and a compelling value proposition.

(iii) Fulfillment and logistics: A new entrant into the online marketplace space does not need to build its own proprietary logistics network. Third-party logistics providers ("3PLs"), including Redline Freight Corp. and numerous other established logistics companies, offer fulfillment, warehousing, and shipping services on a contract basis. NovaMart itself relies on third-party logistics providers for overflow capacity and last-mile delivery, demonstrating that a proprietary logistics network is not a prerequisite for competitive entry.

(iv) Recent successful entry: As discussed in Section X.B below, the specialty consumer goods marketplace segment has witnessed several successful entries and significant expansions by new and existing competitors in the past three to five years, providing concrete evidence that the barriers to entry are surmountable.

B. Recent Entry and Expansion Evidence

Dr. Johansson identifies several recent entrants and expanding competitors in the specialty consumer goods marketplace space that have achieved meaningful scale within a relatively short period of time. The most prominent example is BrightBazaar Inc., which holds approximately 6.1% of the relevant market and is itself a relatively recent entrant. BrightBazaar launched its current marketplace model approximately four years ago and has grown rapidly, investing in seller acquisition, platform technology, and fulfillment partnerships to build a competitive offering in the specialty consumer goods segment. BrightBazaar's success demonstrates that entry into and competitive growth within this market are feasible and achievable within a timeframe relevant to the merger analysis.

In addition to BrightBazaar, the Report identifies several other entrants and expanding competitors, including smaller curated marketplace platforms focused on specific niches within the specialty consumer goods segment (e.g., handcrafted goods, vintage items, sustainable and eco-friendly products, boutique electronics accessories). These platforms have attracted sellers and buyers, secured venture capital or private equity funding, and expanded their operations, further confirming the dynamism and contestability of the relevant market.

The evidence of recent entry and expansion is significant because it demonstrates that the theoretical assessment of low barriers to entry is borne out by actual market experience. New competitors have entered and grown, and the market has become more fragmented — not more concentrated — over time.

C. Timeliness, Likelihood, and Sufficiency

Dr. Johansson applies the three-part framework established by the Merger Guidelines for evaluating whether entry would be sufficient to deter or counteract any potential anticompetitive effect of the Transaction:

• Timeliness: Entry must be achievable within approximately two years of the competitive harm. Dr. Johansson concludes that new entry into the online marketplace platform market for specialty consumer goods can be achieved within this timeframe, based on the evidence of recent entrants that have reached competitive scale within two to three years of launch.

• Likelihood: Entry must be economically motivated — that is, a potential entrant must have a reasonable expectation of earning a sufficient return on its investment to justify the costs and risks of entry. Dr. Johansson concludes that entry is likely, given the strong growth trajectory of the specialty consumer goods ecommerce segment, the availability of venture capital and private equity funding for marketplace startups, and the demonstrated profitability of established marketplace platforms (including NovaMart, which generated $134 million in EBITDA in FY2024 on $891 million in revenue).

• Sufficiency: Entry must be of sufficient scale and scope to counteract any potential anticompetitive effect of the merger. Dr. Johansson concludes that entry at a competitively meaningful scale is achievable, as demonstrated by BrightBazaar's rapid growth to approximately 6.1% market share. Even a modest volume of new entry, combined with expansion by existing competitors, would be sufficient to discipline the combined firm's pricing and prevent the exercise of market power.

Dr. Johansson concludes that all three conditions — timeliness, likelihood, and sufficiency — are satisfied, and that the prospect of entry and expansion provides an additional and independent basis for concluding that the Transaction is not likely to substantially lessen competition.

XI. Efficiencies Analysis

A. Procompetitive Efficiencies

Dr. Johansson's Report identifies several categories of significant procompetitive efficiencies that are expected to result from the Transaction. These efficiencies are expected to benefit consumers and sellers alike and to enhance, rather than diminish, competition in the relevant market.

Logistics and Fulfillment Integration. The combination of NovaMart's 14-facility NovaShip fulfillment network with Cascade's existing distribution infrastructure — including Cascade's 380+ retail locations and regional distribution centers — is expected to significantly improve delivery speed and reduce per-unit shipping costs for marketplace sellers and buyers. By integrating the two companies' logistics operations, the combined firm will be able to offer sellers access to a more extensive and geographically distributed fulfillment network, enabling faster delivery to a larger share of the U.S. population. Buyers will benefit from shorter delivery times and, potentially, reduced shipping costs. Dr. Johansson's analysis indicates that the logistics integration is expected to reduce average per-unit shipping costs by an estimated 8% to 14%, depending on the product category and origin-destination pair, within the first 18 months following the closing of the Transaction.

Technology Synergies. The integration of NovaMart's marketplace technology — including its search algorithm licensed from Arcwave Software LLC and its proprietary suite of seller tools (listing management, inventory tracking, pricing optimization, and performance analytics) — with Cascade's CascadeDirect.com ecommerce platform is expected to enhance the consumer experience and improve seller conversion rates. NovaMart's search and recommendation technology, which has been specifically optimized for specialty consumer goods, is expected to improve the discoverability of specialty products on CascadeDirect.com, driving increased sales and seller satisfaction. Conversely, Cascade's technology capabilities in areas such as personalization, omnichannel integration, and customer relationship management are expected to enhance the NovaMart platform's buyer experience.

Expanded Seller Base and Buyer Reach. The Transaction will connect NovaMart's 62,400 active sellers with Cascade's approximately 28 million active online customers, and Cascade's omnichannel customers with NovaMart's curated specialty goods marketplace. This expansion of the two-sided platform network is expected to increase selection and competition among sellers (as more sellers compete for buyer attention and spending), improve the buyer experience (as buyers gain access to a broader range of specialty products), and generate significant incremental GMV for the combined platform. The expansion of the network is a classic example of a procompetitive efficiency in a platform market, as it increases the value of the platform to both sides of the market.

Advertising Efficiencies. The combination of NovaMart's advertising operations (including its arrangement with Stratton Digital Media Inc., which manages NovaMart's programmatic advertising campaigns) and Cascade's proprietary advertising tools is expected to create a more effective and competitively priced advertising platform for marketplace sellers. Sellers will benefit from access to a larger and more targeted audience, improved ad targeting and measurement capabilities, and lower cost-per-impression and cost-per-click rates resulting from the combination of the two platforms' advertising inventory.

Cloud and Technology Infrastructure. The Transaction also presents opportunities for the consolidation of cloud hosting and data infrastructure. NovaMart's current agreement with Pinnacle Cloud Solutions Inc. for cloud hosting and data storage can potentially be renegotiated or consolidated with Cascade's own cloud infrastructure, yielding cost savings and operational efficiencies. Additionally, the combination of the two companies' data analytics capabilities is expected to improve the quality of market insights, trend analysis, and personalization algorithms available to both sellers and buyers.

B. Merger-Specificity

Dr. Johansson concludes that the efficiencies identified above are merger-specific — meaning that they could not be achieved, or could not be achieved to a comparable degree, through arm's-length contractual arrangements, joint ventures, or internal organic growth alone. This conclusion is based on several considerations:

• The logistics integration requires the unified management and optimization of a combined fulfillment network spanning NovaMart's 14 NovaShip facilities and Cascade's extensive distribution infrastructure. While partial integration could theoretically be achieved through a logistics partnership or joint venture, the full benefits of network optimization — including routing efficiency, inventory positioning, and facility utilization — can only be realized under common ownership.

• The combination of the two-sided platform network effects — connecting NovaMart's sellers with Cascade's buyers and vice versa — requires full integration of the marketplace platforms. A contractual arrangement (e.g., a referral or affiliate arrangement) would not achieve the seamless integration of seller listings, buyer accounts, payment processing, and fulfillment that is necessary to realize the full network benefits.

• The technology synergies, including the integration of NovaMart's search algorithm and seller tools with Cascade's ecommerce platform, require deep technical integration at the platform level that goes well beyond what could be accomplished through a licensing arrangement or technology partnership.

• The advertising efficiencies require the unification of the two platforms' advertising inventory and targeting data, which cannot be achieved through arm's-length arrangements due to data sharing restrictions, competitive sensitivities, and the need for real-time optimization across a unified platform.

C. Quantification

Dr. Johansson provides a quantified estimate of the efficiencies expected to result from the Transaction, based on internal data from Cascade and NovaMart and on his independent analysis. The estimated annual cost savings and revenue synergies are in the range of $45 million to $75 million, with the largest components attributable to logistics and fulfillment integration (estimated $20 million to $35 million annually), technology synergies and platform integration (estimated $10 million to $18 million annually), and advertising efficiencies (estimated $8 million to $14 million annually). These estimates are conservative and are based on assumptions that Dr. Johansson considers reasonable and well-supported by the available data. The methodology and supporting data for the efficiencies quantification are set forth in Appendix F to the Report.

Dr. Johansson further concludes that a significant portion of these efficiencies is expected to be passed through to consumers and sellers in the form of lower seller fees (take rates), better product selection, enhanced platform functionality, and faster delivery. The competitive dynamics of the market — including the presence of BrightBazaar Inc. and numerous other competitors — provide strong incentives for the combined firm to pass through cost savings and quality improvements to attract and retain sellers and buyers, rather than to capture them entirely as profit.

XII. Potential Divestiture Contingency (Brief Reference)

While Dr. Johansson's primary and strong conclusion is that no divestiture or other structural or behavioral remedy is warranted in connection with the Proposed Acquisition, the Report briefly addresses a potential divestiture contingency that the merging parties have identified in the event that the DOJ were to require a remedy as a condition of clearance.

Specifically, the merging parties have identified the NovaHome home décor vertical — NovaMart's dedicated marketplace vertical for home décor and home furnishing products — as a potential divestiture package. The NovaHome vertical represents approximately $620 million in GMV (approximately 10% of NovaMart's total FY2024 GMV of $6.2 billion) and includes a distinct seller community, a dedicated buyer audience, specific product categories, and associated fulfillment and logistics arrangements. The NovaHome vertical operates under a distinct brand within the NovaMart platform and could, with appropriate transition support, be carved out and operated as a viable standalone business by a qualified purchaser.

Dr. Johansson assesses that the NovaHome vertical possesses the characteristics necessary to constitute a viable standalone business: it has an identifiable and loyal seller base, a distinct buyer community, its own brand identity, and sufficient scale (at $620 million in GMV) to support independent operations. If divested, the NovaHome vertical would more than address any arguable competitive overlap between Cascade and NovaMart in the home décor subcategory, which is the product area with the greatest degree of overlap between the two companies' marketplace offerings.

However, Dr. Johansson emphasizes — and this memorandum concurs — that his strong recommendation is that no divestiture is necessary. The low combined market share (approximately 14%), the unconcentrated post-merger HHI (below 1,500), the de minimis predicted price effects (less than 0.5%), the low barriers to entry, and the significant procompetitive efficiencies all support the conclusion that the Transaction should be cleared without conditions. The divestiture contingency is identifi

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It was prepared by Calderwood & Harkness LLP at the direction of counsel in anticipation of litigation and for the purpose of providing legal advice in connection with the U.S. Department of Justice Antitrust Division's review of the proposed acquisition of NovaMart Global Inc. by Cascade Retail Holdings Inc. under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a. This memorandum is protected from disclosure by the attorney-client privilege, the work product doctrine, and any other applicable privilege or protection. No part of this memorandum may be disclosed to any person or entity other than the named recipients without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any privilege or protection.
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, NY 10022 Tel: (212) 555-7800
Fax: (212) 555-7801
July 1, 2025
MEMORANDUM
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I. Introduction and Purpose
This memorandum summarizes the principal findings and conclusions of the economic expert report (the "Report") prepared by Dr. Henrik Johansson, Professor of Economics at Georgetown University and Senior Consultant at Apex Economics LLC, 900 G Street NW, Suite 700, Washington, DC 20001. The Report was completed on June 27, 2025 and delivered to Calderwood & Harkness LLP on that date.
Dr. Johansson was retained by Calderwood & Harkness LLP ("C&H"), acting as outside antitrust counsel to Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Company," Nasdaq: CRHI), in connection with the antitrust review of Cascade's proposed acquisition of 100% of the outstanding capital stock of NovaMart Global Inc. ("NovaMart" or the "Target") for an aggregate purchase price of $1,200,000,000 in cash (the "Transaction" or the "Proposed Acquisition"). The Stock Purchase Agreement governing the Transaction was executed on May 20, 2025 by and among Cascade, NovaMart, and the Selling Stockholders (as defined below).
As the recipients of this memorandum are aware, the parties submitted their pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, on April 11, 2025 (internal tracking number 1038-00009). The applicable filing fee of $2,390,000 was paid at the time of filing. The initial 30-day HSR waiting period would have expired on May 11, 2025. However, on May 8, 2025, the Antitrust Division of the U.S. Department of Justice (the "DOJ" or the "Division") issued a Request for Additional Information and Documentary Material (the "Second Request"), thereby extending the waiting period until thirty days after the parties achieve substantial compliance with the Second Request.
The purpose of the Report, and of this memorandum summarizing it, is to support the comprehensive advocacy submission — commonly referred to as the "White Paper" — that Calderwood & Harkness LLP and Whitfield & Crane LLP (Gabriela Montoya, Partner) are preparing for submission to the DOJ Antitrust Division. The White Paper will argue that the Proposed Acquisition does not substantially lessen competition in any relevant market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. § 18, and that the Transaction should be cleared without conditions. Dr. Johansson's Report provides the economic foundation for that advocacy.
This memorandum is intended to provide the deal team and the Company's legal and business leadership with a detailed but accessible summary of the Report's key analyses, methodologies, and conclusions. The full Report, together with its appendices and supporting technical materials, has been provided separately under the same privilege protections. This memorandum should be read in conjunction with the full Report and should not be treated as a substitute for it.
II. Expert Qualifications
Dr. Henrik Johansson is a Professor of Economics at Georgetown University, where he has held a tenured faculty appointment since 2009. He received his Ph.D. in Economics from the Massachusetts Institute of Technology in 2003 and his B.A. in Economics (summa cum laude) from the University of Chicago in 1997. Dr. Johansson's areas of academic specialization include industrial organization, antitrust economics, empirical market analysis, and the economics of platform markets. He has published extensively in leading peer-reviewed economics journals, including the American Economic Review, the RAND Journal of Economics, the Journal of Industrial Economics, and the International Journal of Industrial Organization, among others.
In addition to his academic career, Dr. Johansson serves as a Senior Consultant at Apex Economics LLC, a boutique economic consulting firm headquartered in Washington, D.C. that specializes in antitrust, competition policy, and regulatory economics. Apex Economics has been involved in some of the most significant merger review proceedings of the past decade, advising both merging parties and government agencies.
Dr. Johansson has an extensive track record as both a consulting and testifying expert in merger review proceedings. He has been retained as an economic expert in more than forty matters before the DOJ Antitrust Division and the Federal Trade Commission ("FTC"), and has provided expert testimony in federal court in connection with merger challenges and private antitrust litigation. His prior engagements include matters involving online platforms, retail markets, consumer goods distribution, and technology-driven marketplaces. A complete list of Dr. Johansson's prior engagements and testimony, along with his full curriculum vitae, is provided in Appendix A to the Report.
Dr. Johansson's engagement in connection with the Proposed Acquisition was coordinated through Howard Bellamy at Calderwood & Harkness LLP and Gabriela Montoya at Whitfield & Crane LLP. His work has been conducted at the direction of counsel and under the protection of the attorney-client privilege and the work product doctrine.
III. Transaction Overview (As Presented in the Report)
The Report provides a detailed overview of the Transaction and the parties, which is summarized below.
A. The Buyer
Cascade Retail Holdings Inc. is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. Cascade is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. Cascade is a diversified omnichannel retailer that operates over 380 brick-and-mortar retail locations across North America, spanning the United States and Canada, as well as a proprietary ecommerce platform, CascadeDirect.com, which serves approximately 28 million active registered customers. Cascade's retail operations encompass a broad range of consumer products, including apparel, home goods, consumer electronics, sporting goods, and specialty items.
For the fiscal year ended January 31, 2025 ("FY2024"), Cascade reported total revenues of approximately $14.7 billion and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $1.83 billion. As of May 19, 2025 — the last trading day prior to the execution of the Stock Purchase Agreement — Cascade's market capitalization was approximately $22.4 billion. CascadeDirect.com has evolved in recent years from a purely first-party ecommerce operation (in which Cascade itself sources, holds, and sells inventory) to a hybrid model that includes a third-party marketplace function through which independent sellers can list and sell products directly to consumers on the CascadeDirect.com platform. The marketplace function was launched in October 2022 and has been growing steadily, although it remains a relatively small component of Cascade's overall revenue.
B. The Target
NovaMart Global Inc. is a Delaware corporation that is privately held. NovaMart is headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart is one of the largest independent online marketplace platforms in the United States dedicated to the sale of specialty consumer goods, including home décor, artisanal products, handcrafted items, boutique fashion accessories, and consumer electronics accessories. Unlike Cascade, NovaMart operates exclusively as an online platform and does not maintain any physical retail presence.
For FY2024, NovaMart reported total revenues of approximately $891 million and EBITDA of approximately $134 million. NovaMart's gross merchandise volume ("GMV") — the total value of merchandise sold through its platform — was approximately $6.2 billion in FY2024. The platform hosts approximately 62,400 active sellers and has approximately 9.1 million registered buyers. NovaMart generates revenue primarily through (i) commission fees charged to sellers on each completed transaction ("take rates"), (ii) advertising revenue from sellers and third-party advertisers, and (iii) fees for premium seller services, including enhanced product placement, analytics tools, and fulfillment services.
NovaMart operates a proprietary logistics and fulfillment network branded "NovaShip," which consists of 14 fulfillment centers distributed across 9 states: California (3 facilities), New Jersey (2 facilities), Georgia (2 facilities), Florida (2 facilities), Ohio (1 facility), Illinois (1 facility), Pennsylvania (1 facility), Tennessee (1 facility), and Washington (1 facility). The NovaShip network enables NovaMart to offer competitive delivery speeds to the majority of the U.S. population, with standard delivery times of two to four business days for most orders. NovaMart also utilizes third-party logistics providers, including Redline Freight Corp., for overflow capacity and last-mile delivery.
C. Transaction Structure and Consideration
The Transaction is structured as a 100% stock purchase in which Cascade will acquire all of the outstanding capital stock of NovaMart for an aggregate all-cash purchase price of $1,200,000,000. The Transaction does not include any earnout, contingent consideration, or stock component. The purchase price implies an enterprise value of approximately $1.2 billion, translating to the following valuation multiples:
• EV/EBITDA: Approximately 8.96x ($1,200,000,000 ÷ $134,000,000)
• EV/Revenue: Approximately 1.35x ($1,200,000,000 ÷ $891,000,000)
These multiples are consistent with precedent transactions in the online marketplace and specialty ecommerce space, reflecting NovaMart's strong seller base, growing GMV trajectory, and the strategic value of its NovaShip fulfillment infrastructure.
D. Selling Stockholders
The selling stockholders in the Transaction and their respective ownership interests in NovaMart are as follows:
Ridgeline Equity Partners, LP and Brindoval Ventures Fund III, LP are the institutional investors in NovaMart and collectively hold a majority of the outstanding capital stock. Julian Reeves and Priya Narasimhan are the co-founders of NovaMart and have served as Chief Executive Officer and Chief Technology Officer, respectively, since the company's founding in 2014.
E. Strategic Rationale
The Report notes that the stated strategic rationale for the Transaction, as articulated by Cascade's management and board of directors, is to extend Cascade's reach into the third-party marketplace segment and to integrate NovaMart's curated seller base and buyer community into Cascade's existing omnichannel retail platform. Specifically, Cascade seeks to leverage NovaMart's marketplace expertise, technology platform, and NovaShip fulfillment network to accelerate the growth of Cascade's own third-party marketplace function on CascadeDirect.com, to offer Cascade's 28 million active online customers access to a broader selection of specialty consumer goods, and to provide NovaMart's 62,400 active sellers with access to Cascade's significantly larger customer base and physical retail footprint. The combination of the two companies' complementary capabilities is expected to create a more competitive and differentiated omnichannel offering that benefits both sellers and buyers.
IV. Scope of the Economic Analysis
Dr. Johansson's Report addresses the full range of economic issues relevant to the DOJ's review of the Proposed Acquisition under Section 7 of the Clayton Act. Specifically, Dr. Johansson was asked to analyze the following:
(a) The appropriate relevant product market or markets in which to evaluate the competitive effects of the Transaction;
(b) The appropriate relevant geographic market or markets;
(c) The competitive effects of the Proposed Acquisition, including an analysis of market concentration using the Herfindahl-Hirschman Index ("HHI");
(d) A merger simulation model predicting the likely post-merger pricing effects of the Transaction;
(e) The conditions of entry into and expansion within the relevant market, including whether entry would be timely, likely, and sufficient to counteract any potential anticompetitive effect;
(f) The efficiencies likely to result from the Transaction, including whether such efficiencies are merger-specific and verifiable, and the extent to which they are likely to be passed through to consumers; and
(g) The ultimate question of whether the Transaction is likely to substantially lessen competition in any relevant market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. § 18.
In conducting his analysis, Dr. Johansson reviewed and relied upon a wide range of data sources and materials, including the following:
• Publicly available industry data, including market reports published by leading industry research firms covering the online marketplace and specialty ecommerce sectors;
• Internal Cascade and NovaMart business documents, including strategic plans, business reviews, board presentations, financial projections, customer and seller data, and competitive analyses, produced through the clean team process governed by the Clean Team / Antitrust Protocol Agreement dated February 18, 2025 (the "Clean Team Agreement");
• Third-party market reports and analyses from independent research firms, including reports on online marketplace GMV, seller and buyer demographics, and competitive dynamics;
• SEC filings for Cascade (10-K, 10-Q, proxy statements, and other public filings) and comparable public companies;
• GMV data, revenue data, take-rate data, seller counts, buyer counts, and transaction volume data from Cascade and NovaMart, provided through the clean team process;
• Data on competing marketplace platforms, including publicly available financial and operational data for BrightBazaar Inc. and other identified competitors;
• Seller surveys and buyer switching behavior data collected by NovaMart in the ordinary course of business and produced under the Clean Team Agreement; and
• Information produced by Cascade and NovaMart in response to the DOJ's Second Request, to the extent available at the time of the Report's preparation and accessible through the clean team process.
Dr. Johansson's methodology is grounded in well-established principles of antitrust economics and is consistent with the framework set forth in the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (2023) (the "Merger Guidelines"). The technical details of Dr. Johansson's methodology are set forth in Appendix B to the Report.
V. Relevant Product Market Definition
A. Analytical Framework
Dr. Johansson's analysis of the relevant product market follows the standard framework established by the Merger Guidelines and widely accepted in antitrust economics. The cornerstone of this framework is the hypothetical monopolist test, also known as the "SSNIP test" (Small but Significant and Non-transitory Increase in Price). Under this test, the relevant product market is defined as the smallest group of products such that a hypothetical profit-maximizing monopolist controlling all of the products in the group would find it profitable to impose a small but significant and non-transitory increase in price — typically defined as a 5% increase — on at least one product in the group.
The hypothetical monopolist test is applied by considering two primary forms of substitution. First, demand-side substitution examines whether customers (in this case, both sellers and buyers on marketplace platforms) would switch to alternative products or platforms in response to a price increase, such that the price increase would be unprofitable for the hypothetical monopolist. Second, supply-side substitution examines whether firms not currently producing the relevant product could quickly and economically reposition their operations to begin offering the relevant product in response to a price increase, thereby constraining the hypothetical monopolist's pricing power. Both forms of substitution are considered in defining the boundaries of the relevant product market.
Dr. Johansson notes that in the context of online marketplace platforms, the "price" relevant to the SSNIP analysis is the take rate — that is, the commission rate and associated fees charged by the platform to sellers on each completed transaction — rather than the price of the underlying goods sold on the platform. This approach is consistent with the treatment of platform markets in recent DOJ and FTC practice and in economic literature on two-sided platform markets.
B. Proposed Relevant Product Market: Online Marketplace Platforms for Specialty Consumer Goods
Based on his application of the hypothetical monopolist test and his review of the evidence, Dr. Johansson defines the relevant product market as "online marketplace platforms for specialty consumer goods." This market encompasses third-party seller marketplace platforms that facilitate the sale of specialty consumer goods, including but not limited to home décor, artisanal and handcrafted products, boutique fashion accessories, and consumer electronics accessories, through a curated online marketplace in which independent sellers list and sell their products directly to consumers.
This market definition is intended to capture the core area of competitive overlap between Cascade's CascadeDirect.com marketplace function and NovaMart's marketplace platform. Both platforms serve as intermediaries connecting sellers of specialty consumer goods with consumers seeking those products, and both derive revenue primarily from take rates, advertising, and seller services.
Dr. Johansson carefully distinguishes this market from several adjacent but distinct categories of economic activity:
(i) General online retail (first-party ecommerce): Traditional ecommerce operations in which a retailer sources, holds inventory of, and sells its own products directly to consumers (e.g., a retailer selling its own merchandise through its website). While Cascade's CascadeDirect.com platform does include a significant first-party retail component, the relevant market for purposes of this analysis is limited to the third-party marketplace function in which independent sellers list and sell their products.
(ii) General-purpose online marketplaces: Broad-based online marketplace platforms that facilitate transactions across a wide range of product categories without a particular focus on specialty or niche consumer goods. While there may be some degree of overlap in product categories, Dr. Johansson's analysis indicates that sellers and buyers on specialty marketplace platforms view those platforms as distinct from general-purpose platforms due to differences in curation, seller community, buyer demographics, platform features, and brand identity.
(iii) Brick-and-mortar retail: Physical retail stores, including specialty retailers, that sell consumer goods through in-person transactions. While brick-and-mortar retailers may sell some of the same types of products available on specialty marketplace platforms, the evidence indicates that the online marketplace channel is sufficiently distinct — in terms of seller and buyer behavior, platform functionality, geographic reach, and competitive dynamics — to constitute a separate relevant market.
(iv) Social commerce and social media selling platforms: Platforms such as social media networks that have introduced shopping features enabling users to buy and sell products. While social commerce is a growing segment, Dr. Johansson's analysis indicates that it does not currently represent a close substitute for dedicated specialty marketplace platforms, due to differences in search functionality, product curation, seller tools, fulfillment infrastructure, and buyer trust and purchasing behavior.
Cascade's CascadeDirect.com platform operates both as a first-party retailer (selling Cascade's own inventory) and, since October 2022, as a third-party marketplace enabling independent sellers to list and sell products on the platform. The third-party marketplace function of CascadeDirect.com has significant overlap with NovaMart in the specialty consumer goods segment, as Cascade has actively recruited sellers of home décor, artisanal products, and consumer electronics accessories to its marketplace. NovaMart, for its part, operates primarily and almost exclusively as a third-party marketplace with a curated focus on specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.
C. Demand-Side Substitution Analysis
Dr. Johansson's demand-side substitution analysis relies on multiple categories of evidence to establish the boundaries of the relevant product market.
Seller-Side Substitution. The Report presents evidence that sellers on specialty marketplace platforms view those platforms as distinct from general-purpose ecommerce channels and that switching from a specialty platform to a non-specialized platform involves significant costs and competitive disadvantages. This evidence includes:
• Seller surveys: NovaMart's internal seller satisfaction surveys, conducted in the ordinary course of business in 2023 and 2024 and produced through the clean team process, indicate that a substantial majority of NovaMart's active sellers identified the platform's curation and specialty focus as the primary reason for choosing to sell on NovaMart, and that fewer than 12% of sellers reported that they would switch to a general-purpose online marketplace in response to a moderate increase in NovaMart's take rate.
• Switching-cost analysis: Dr. Johansson conducted a switching-cost analysis based on seller transactional data and found that the costs of moving from a specialty marketplace platform to a non-specialized platform include (i) loss of access to a targeted buyer community, (ii) reduced product visibility due to lack of curation, (iii) the need to invest in new seller tools and listing optimization for a different platform, and (iv) the cost of rebuilding seller reputation and ratings on a new platform. These switching costs are non-trivial and tend to lock sellers into the specialty marketplace channel.
• Multi-homing evidence: While many sellers on NovaMart also sell on other platforms (a practice known as "multi-homing"), the evidence indicates that multi-homing is more common between specialty marketplace platforms than between specialty platforms and general-purpose platforms, further supporting the conclusion that specialty marketplaces constitute a distinct market.
Buyer-Side Substitution. The Report also presents evidence that buyers seeking specialty consumer goods treat curated marketplace platforms as differentiated from mass-market general retail, both online and brick-and-mortar:
• Buyer behavior data: Analysis of NovaMart's transactional data and user analytics indicates that buyers on NovaMart are motivated by the platform's curation, product uniqueness, and the ability to discover artisanal and specialty products not readily available on general-purpose platforms. Buyer conversion rates and repeat purchase rates on NovaMart are significantly higher than industry averages for general-purpose ecommerce, suggesting a high degree of buyer loyalty to the specialty marketplace format.
• Cross-elasticity analysis: Dr. Johansson estimated the cross-price elasticity of demand between NovaMart's marketplace and general-purpose online platforms and found that it is relatively low, indicating that an increase in NovaMart's take rate (which could be passed through to buyers in the form of higher product prices) would not drive a significant shift in buyer demand to general-purpose platforms.
D. Supply-Side Substitution Analysis
Dr. Johansson also assessed whether supply-side substitution — the ability of firms not currently operating specialty marketplace platforms to quickly and economically reposition into the relevant market — warrants broadening the market definition. His conclusion is that while barriers to entry are relatively low in absolute terms (as discussed in Section X below), the repositioning of a general-purpose online platform or a brick-and-mortar retailer to serve the specialty consumer goods marketplace segment is neither instantaneous nor costless. Building a curated seller community, developing specialized search and recommendation algorithms, and establishing the brand identity and buyer trust associated with a specialty marketplace all require significant time and investment. Accordingly, supply-side substitution does not justify broadening the relevant product market beyond specialty consumer goods marketplace platforms.
E. DOJ's Potential Broader Market Definition
Dr. Johansson acknowledges that the DOJ may consider defining the relevant product market more broadly than "online marketplace platforms for specialty consumer goods." Possible broader market definitions that the DOJ might advance include "all online marketplace platforms" (encompassing both specialty and general-purpose platforms) or "all ecommerce retail" (encompassing both marketplace and first-party retail). The Report addresses these alternative market definitions and demonstrates that, even under the broadest plausible market definition, the competitive analysis supports clearance of the Transaction. As discussed in Sections VII and VIII below, under any broader market definition, Cascade's and NovaMart's combined market shares would be even smaller, the HHI levels even lower, and the competitive effects even more attenuated than under the specialty marketplace definition that Dr. Johansson considers most appropriate.
VI. Relevant Geographic Market Definition
Dr. Johansson concludes that the relevant geographic market for the analysis of the Proposed Acquisition is the United States (nationwide).
This conclusion is based on several factors. First, both Cascade and NovaMart serve customers throughout the United States. NovaMart's online marketplace platform is accessible to buyers in all 50 states and the District of Columbia, and its 14 NovaShip fulfillment centers are strategically distributed across 9 states — California (3), New Jersey (2), Georgia (2), Florida (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), and Washington (1) — to enable efficient nationwide delivery. NovaMart's standard delivery window of two to four business days covers the vast majority of the U.S. population.
Second, Cascade's CascadeDirect.com platform serves approximately 28 million active registered customers located across the United States. In addition, Cascade's network of over 380 brick-and-mortar retail locations spans North America, with stores in 44 U.S. states and 6 Canadian provinces. The CascadeDirect.com marketplace function is available to buyers nationwide, regardless of proximity to a physical Cascade store.
Third, the nature of online marketplace platforms inherently supports a nationwide geographic market. Unlike brick-and-mortar retail, where geographic proximity between the consumer and the store is a critical determinant of competition, online marketplace platforms connect sellers and buyers across geographic boundaries. Sellers on NovaMart and CascadeDirect.com can ship products to customers anywhere in the country, and buyers can browse and purchase from sellers located in any state.
Fourth, Dr. Johansson found no evidence of meaningful regional sub-markets within the United States for online marketplace platforms for specialty consumer goods. Pricing (take rates), seller terms, and buyer access do not vary by region on either NovaMart or CascadeDirect.com. Competitive conditions are substantially uniform across the country.
For these reasons, Dr. Johansson defines the relevant geographic market as the United States, consistent with the treatment of online marketplace platforms in prior DOJ and FTC merger investigations.
VII. Market Participants and Market Share Analysis
A. Identification of Market Participants
Based on his analysis of the relevant product and geographic markets, Dr. Johansson identifies the following key participants in the market for online marketplace platforms for specialty consumer goods in the United States:
1. Cascade Retail Holdings Inc. (CascadeDirect.com marketplace function): As described above, Cascade operates a third-party marketplace on CascadeDirect.com that enables independent sellers to list and sell specialty consumer goods, home décor, artisanal products, and consumer electronics accessories. The marketplace function was launched in October 2022 and has been growing steadily but remains a relatively modest component of Cascade's overall operations.
2. NovaMart Global Inc.: NovaMart is one of the largest independent online marketplace platforms in the U.S. dedicated to specialty consumer goods, with approximately 62,400 active sellers and 9.1 million registered buyers, and FY2024 GMV of approximately $6.2 billion.
3. BrightBazaar Inc.: BrightBazaar is identified in the Report as the next-largest competitor to NovaMart in the specialty consumer goods marketplace segment. BrightBazaar is a publicly traded online marketplace platform that focuses on curated home décor, lifestyle products, and artisanal goods. BrightBazaar has experienced rapid growth in recent years and is itself a relatively recent entrant into the specialty consumer goods marketplace space, having launched its current marketplace model approximately four years ago.
4. Other competitors: The remaining market share is distributed among numerous other marketplace platforms and niche specialty ecommerce platforms. These include range smaller curated marketplaces focused on specific product categories (e.g., handcrafted goods, vintage items, boutique electronics accessories), as well as certain hybrid platforms that operate both as first-party retailers and third-party marketplaces with specialty consumer goods components. Dr. Johansson describes these competitors generically by category rather than naming each one individually, in order to protect commercially sensitive data, but notes that the aggregate share held by these participants is substantial, reflecting the highly fragmented nature of the market.
B. Market Share Estimates (Based on U.S. Online Specialty Consumer Goods GMV)
Dr. Johansson estimates market shares in the relevant market based on the gross merchandise volume (GMV) of specialty consumer goods sold through online marketplace platforms in the United States. GMV is the most appropriate measure of market share in this context because it captures the total value of transactions facilitated by each platform, which is the primary basis on which platforms compete for sellers and buyers. Revenue-based shares would understate the competitive significance of platforms with lower take rates and overstate the significance of platforms with higher take rates, making GMV the more reliable and commonly used metric.
The following table summarizes Dr. Johansson's market share estimates for the relevant market:
These market share estimates are based on Cascade's and C&H's internal analysis of available GMV data and were independently verified and refined by Dr. Johansson using third-party industry data, including market reports from leading ecommerce research firms, publicly available financial disclosures, and seller and transaction volume data. While precise market share figures for privately held competitors are necessarily estimates, Dr. Johansson is confident that the figures presented in the Report are reasonable and, if anything, conservative (i.e., they may slightly overstate the combined share of Cascade and NovaMart relative to the total market).
C. Key Observation
The most important takeaway from the market share analysis is that even on a combined basis, Cascade and NovaMart would account for only approximately 14.0% of the relevant market — a combined share that is well below the thresholds that have historically triggered enforcement action by the DOJ or FTC in horizontal merger cases. The market remains highly fragmented, with no single platform commanding a dominant position. BrightBazaar Inc., with approximately 6.1% share, is a vigorous and growing competitor, and the remaining approximately 79.9% of the market is shared among numerous other platforms, confirming that competition in this space is robust and multi-faceted.
Dr. Johansson emphasizes that the low combined market share is strongly indicative that the Transaction will not confer upon the combined firm the ability or incentive to exercise market power, raise take rates, reduce seller services, or otherwise act in an anticompetitive manner. The combined firm will continue to face vigorous competition from BrightBazaar and the many other participants in this dynamic and growing market.
VIII. HHI (Herfindahl-Hirschman Index) Analysis
A. Pre-Merger HHI Calculation
The Herfindahl-Hirschman Index ("HHI") is a widely used measure of market concentration that is calculated by summing the squares of the market share percentages of all firms in the relevant market. The Merger Guidelines use HHI thresholds to classify markets as unconcentrated, moderately concentrated, or highly concentrated, and to assess the potential competitive significance of a proposed merger based on both the absolute level of post-merger concentration and the change in concentration (the "delta") attributable to the transaction.
Dr. Johansson presents a detailed calculation of the pre-merger HHI in the relevant market based on the market shares of all identified participants. The individual HHI contributions of the principal market participants are as follows:
• Cascade (8.3%): 8.3² ≈ 68.9
• NovaMart (5.7%): 5.7² ≈ 32.5
• BrightBazaar Inc. (6.1%): 6.1² ≈ 37.2
• All other competitors: The remaining approximately 79.9% of the market is distributed among numerous smaller participants. Dr. Johansson estimated the individual shares of these participants based on available data and calculated their aggregate HHI contribution. Because the remaining share is distributed among a large number of competitors, each with a relatively small individual share, the aggregate HHI contribution of the "all other" category is modest.
Taking into account the contributions of all identified market participants, Dr. Johansson estimates that the pre-merger HHI is well below 1,500, placing the market squarely in the "unconcentrated" category under the Merger Guidelines. The precise pre-merger HHI calculation, with supporting share data for all identified participants, is set forth in Appendix C to the Report.
B. Post-Merger HHI Calculation
Following the Transaction, Cascade and NovaMart would be combined into a single entity with an estimated market share of approximately 14.0%. The post-merger HHI is recalculated by replacing the separate Cascade and NovaMart shares with the combined 14.0% share:
• Combined Cascade/NovaMart (14.0%): 14.0² = 196.0
• BrightBazaar Inc. (6.1%): 6.1² ≈ 37.2
• All other competitors: (unchanged from pre-merger)
The delta (change in HHI) attributable to the Transaction is calculated as:
Delta = 2 × 8.3 × 5.7 ≈ 94.6 (approximately 95 points)
This delta represents the incremental increase in market concentration resulting solely from the combination of Cascade and NovaMart. The post-merger HHI, including the contributions of all market participants, remains below 1,500.
C. Merger Guidelines Safe Harbor Analysis
The Merger Guidelines establish clear thresholds for evaluating the competitive significance of market concentration:
• Unconcentrated markets (post-merger HHI below 1,500): Mergers in unconcentrated markets are generally considered unlikely to have adverse competitive effects and ordinarily require no further analysis.
• Moderately concentrated markets (post-merger HHI between 1,500 and 2,500): Mergers producing an increase in HHI of more than 100 points in moderately concentrated markets potentially raise significant competitive concerns and often warrant scrutiny.
• Highly concentrated markets (post-merger HHI above 2,500): Mergers producing an increase in HHI of more than 100 points in highly concentrated markets are presumed likely to enhance market power, and mergers producing an increase of more than 200 points are presumed likely to enhance market power significantly.
Under these thresholds, the Proposed Acquisition falls comfortably within the safe harbor for mergers in unconcentrated markets. The post-merger HHI remains below 1,500, and the delta of approximately 95 points is below the 100-point threshold that would trigger a presumption of competitive harm even in a moderately concentrated market. Dr. Johansson concludes that the HHI analysis provides strong quantitative support for the conclusion that the Transaction is unlikely to have adverse competitive effects.
Furthermore, Dr. Johansson emphasizes that even if the DOJ were to apply a different market definition — including the broader alternative definitions discussed in Section V.E above — the HHI results would be even more favorable to clearance. Under a broader market definition encompassing "all online marketplace platforms" or "all ecommerce retail," both the pre-merger and post-merger HHI levels would be lower, the delta would be smaller, and the Transaction would fall even more clearly within the safe harbor. Dr. Johansson presents these alternative HHI calculations in Appendix C to the Report.
IX. Merger Simulation Analysis
A. Model Description
In addition to the structural market share and HHI analysis, Dr. Johansson conducted a merger simulation analysis to predict the likely post-merger pricing effects of the Transaction. Merger simulation models are a well-established tool in antitrust economics and are frequently employed by both merging parties and government agencies to estimate the competitive effects of horizontal mergers in differentiated product markets.
Dr. Johansson employs a differentiated products merger simulation model that accounts for the fact that online marketplace platforms are not homogeneous products but rather differentiated along multiple dimensions, including product selection, curation, seller services, buyer experience, take rates, and fulfillment capabilities. The model predicts the change in equilibrium take rates (the "price" of the platform's intermediation service) that would result from the combination of Cascade's and NovaMart's marketplace operations, holding all other competitive conditions constant.
The model is calibrated to observed pre-merger market conditions using the following key inputs, each of which is estimated or derived from empirical data:
B. Key Inputs
• Pre-merger take-rate margins: The model incorporates observed marketplace commission rates and advertising revenue per GMV dollar for both Cascade's CascadeDirect.com marketplace and NovaMart's marketplace. These margins were derived from internal financial data provided by both companies through the clean team process and reflect the variable profit margin that each platform earns on each dollar of GMV transacted through its marketplace.
• Diversion ratios: Diversion ratios measure the fraction of sellers (and, on the buyer side, the fraction of buyers) who would switch from one platform to another in response to a take-rate increase. Dr. Johansson estimated diversion ratios between Cascade's marketplace and NovaMart's marketplace, and between each of them and other competitors (including BrightBazaar Inc. and other platforms), based on analysis of buyer switching behavior, seller multi-homing patterns, and natural experiments involving platform fee changes. The estimated diversion ratios between Cascade and NovaMart are relatively modest, reflecting the fact that the two platforms are not each other's closest substitutes for the majority of their respective sellers and buyers.
• Demand elasticity estimates: Dr. Johansson estimated the price elasticity of demand for marketplace platform services using observed pricing variation events, including historical changes in take rates on NovaMart and CascadeDirect.com and the resulting changes in seller activity and GMV. These elasticity estimates reflect the sensitivity of sellers and buyers to changes in platform fees and are a critical input into the merger simulation model.
The model assumes Bertrand (price) competition among differentiated platforms, with each platform maximizing its own profit by setting take rates given the take rates of its competitors. This is a standard assumption in differentiated products merger simulation models and is appropriate for the marketplace platform setting, where platforms compete by setting commission rates and fee schedules.
C. Simulation Results
The merger simulation predicts de minimis post-merger price increases (take-rate increases) resulting from the Transaction. Specifically, the model estimates that the combined firm's profit-maximizing take rate would increase by less than 0.5% relative to the pre-merger equilibrium. This predicted price effect is well within the range that antitrust economists and enforcement agencies consider competitively insignificant — that is, it falls below the level at which the price increase would be likely to harm consumers or sellers to a degree that would warrant intervention.
The modest predicted price effect reflects several key features of the competitive landscape:
• The high degree of fragmentation in the relevant market, with no single platform holding a dominant position and numerous competitors collectively holding approximately 80% of the market;
• The relatively small combined share of Cascade and NovaMart (approximately 14%), which limits the combined firm's ability to raise take rates without losing sellers and buyers to competing platforms;
• The substantial competitive constraints imposed by BrightBazaar Inc. (approximately 6.1% share) and the numerous other marketplace platforms in the market, which provide sellers and buyers with ample alternatives; and
• The moderate diversion ratios between Cascade and NovaMart, indicating that the two platforms are not each other's closest substitutes and that a significant portion of any sellers or buyers lost due to a take-rate increase would divert to other competitors rather than to the merging partner.
Dr. Johansson conducted extensive sensitivity analyses varying the key parameters of the model, including demand elasticities, diversion ratios, and margin assumptions. These sensitivity analyses confirm the robustness of the central conclusion: across a wide range of reasonable parameter values, the predicted post-merger take-rate increase remains small — generally in the range of 0.2% to 0.7% — and does not approach a level that would be considered competitively significant. The full specification of the merger simulation model, including all parameter values and sensitivity analysis results, is set forth in Appendix D to the Report.
X. Entry and Expansion Analysis
A. Low Barriers to Entry
Dr. Johansson's Report includes a detailed assessment of the conditions of entry into and expansion within the relevant market for online marketplace platforms for specialty consumer goods. His conclusion is that barriers to entry are relatively low compared to traditional brick-and-mortar retail and many other industries.
This conclusion is based on several key factors:
(i) Technology availability: The technology required to develop and operate an online marketplace platform is widely available. Marketplace platform software can be developed in-house, built using open-source frameworks, or licensed from established technology providers at manageable cost. The infrastructure for hosting and scaling an online platform — including cloud computing, payment processing, and data analytics — is readily available through third-party providers (such as Pinnacle Cloud Solutions Inc. and other major cloud hosting companies) on a pay-as-you-go basis, significantly reducing the upfront capital investment required to launch a marketplace.
(ii) Seller and buyer acquisition: While building a critical mass of sellers and buyers is a necessary condition for a marketplace platform's success, the tools for acquiring sellers and buyers — including digital marketing, search engine optimization, social media advertising, content marketing, and influencer partnerships — are widely accessible and can be deployed at scale. The cost of seller and buyer acquisition in the specialty consumer goods segment, while not trivial, is manageable for firms with adequate funding and a compelling value proposition.
(iii) Fulfillment and logistics: A new entrant into the online marketplace space does not need to build its own proprietary logistics network. Third-party logistics providers ("3PLs"), including Redline Freight Corp. and numerous other established logistics companies, offer fulfillment, warehousing, and shipping services on a contract basis. NovaMart itself relies on third-party logistics providers for overflow capacity and last-mile delivery, demonstrating that a proprietary logistics network is not a prerequisite for competitive entry.
(iv) Recent successful entry: As discussed in Section X.B below, the specialty consumer goods marketplace segment has witnessed several successful entries and significant expansions by new and existing competitors in the past three to five years, providing concrete evidence that the barriers to entry are surmountable.
B. Recent Entry and Expansion Evidence
Dr. Johansson identifies several recent entrants and expanding competitors in the specialty consumer goods marketplace space that have achieved meaningful scale within a relatively short period of time. The most prominent example is BrightBazaar Inc., which holds approximately 6.1% of the relevant market and is itself a relatively recent entrant. BrightBazaar launched its current marketplace model approximately four years ago and has grown rapidly, investing in seller acquisition, platform technology, and fulfillment partnerships to build a competitive offering in the specialty consumer goods segment. BrightBazaar's success demonstrates that entry into and competitive growth within this market are feasible and achievable within a timeframe relevant to the merger analysis.
In addition to BrightBazaar, the Report identifies several other entrants and expanding competitors, including smaller curated marketplace platforms focused on specific niches within the specialty consumer goods segment (e.g., handcrafted goods, vintage items, sustainable and eco-friendly products, boutique electronics accessories). These platforms have attracted sellers and buyers, secured venture capital or private equity funding, and expanded their operations, further confirming the dynamism and contestability of the relevant market.
The evidence of recent entry and expansion is significant because it demonstrates that the theoretical assessment of low barriers to entry is borne out by actual market experience. New competitors have entered and grown, and the market has become more fragmented — not more concentrated — over time.
C. Timeliness, Likelihood, and Sufficiency
Dr. Johansson applies the three-part framework established by the Merger Guidelines for evaluating whether entry would be sufficient to deter or counteract any potential anticompetitive effect of the Transaction:
• Timeliness: Entry must be achievable within approximately two years of the competitive harm. Dr. Johansson concludes that new entry into the online marketplace platform market for specialty consumer goods can be achieved within this timeframe, based on the evidence of recent entrants that have reached competitive scale within two to three years of launch.
• Likelihood: Entry must be economically motivated — that is, a potential entrant must have a reasonable expectation of earning a sufficient return on its investment to justify the costs and risks of entry. Dr. Johansson concludes that entry is likely, given the strong growth trajectory of the specialty consumer goods ecommerce segment, the availability of venture capital and private equity funding for marketplace startups, and the demonstrated profitability of established marketplace platforms (including NovaMart, which generated $134 million in EBITDA in FY2024 on $891 million in revenue).
• Sufficiency: Entry must be of sufficient scale and scope to counteract any potential anticompetitive effect of the merger. Dr. Johansson concludes that entry at a competitively meaningful scale is achievable, as demonstrated by BrightBazaar's rapid growth to approximately 6.1% market share. Even a modest volume of new entry, combined with expansion by existing competitors, would be sufficient to discipline the combined firm's pricing and prevent the exercise of market power.
Dr. Johansson concludes that all three conditions — timeliness, likelihood, and sufficiency — are satisfied, and that the prospect of entry and expansion provides an additional and independent basis for concluding that the Transaction is not likely to substantially lessen competition.
XI. Efficiencies Analysis
A. Procompetitive Efficiencies
Dr. Johansson's Report identifies several categories of significant procompetitive efficiencies that are expected to result from the Transaction. These efficiencies are expected to benefit consumers and sellers alike and to enhance, rather than diminish, competition in the relevant market.
Logistics and Fulfillment Integration. The combination of NovaMart's 14-facility NovaShip fulfillment network with Cascade's existing distribution infrastructure — including Cascade's 380+ retail locations and regional distribution centers — is expected to significantly improve delivery speed and reduce per-unit shipping costs for marketplace sellers and buyers. By integrating the two companies' logistics operations, the combined firm will be able to offer sellers access to a more extensive and geographically distributed fulfillment network, enabling faster delivery to a larger share of the U.S. population. Buyers will benefit from shorter delivery times and, potentially, reduced shipping costs. Dr. Johansson's analysis indicates that the logistics integration is expected to reduce average per-unit shipping costs by an estimated 8% to 14%, depending on the product category and origin-destination pair, within the first 18 months following the closing of the Transaction.
Technology Synergies. The integration of NovaMart's marketplace technology — including its search algorithm licensed from Arcwave Software LLC and its proprietary suite of seller tools (listing management, inventory tracking, pricing optimization, and performance analytics) — with Cascade's CascadeDirect.com ecommerce platform is expected to enhance the consumer experience and improve seller conversion rates. NovaMart's search and recommendation technology, which has been specifically optimized for specialty consumer goods, is expected to improve the discoverability of specialty products on CascadeDirect.com, driving increased sales and seller satisfaction. Conversely, Cascade's technology capabilities in areas such as personalization, omnichannel integration, and customer relationship management are expected to enhance the NovaMart platform's buyer experience.
Expanded Seller Base and Buyer Reach. The Transaction will connect NovaMart's 62,400 active sellers with Cascade's approximately 28 million active online customers, and Cascade's omnichannel customers with NovaMart's curated specialty goods marketplace. This expansion of the two-sided platform network is expected to increase selection and competition among sellers (as more sellers compete for buyer attention and spending), improve the buyer experience (as buyers gain access to a broader range of specialty products), and generate significant incremental GMV for the combined platform. The expansion of the network is a classic example of a procompetitive efficiency in a platform market, as it increases the value of the platform to both sides of the market.
Advertising Efficiencies. The combination of NovaMart's advertising operations (including its arrangement with Stratton Digital Media Inc., which manages NovaMart's programmatic advertising campaigns) and Cascade's proprietary advertising tools is expected to create a more effective and competitively priced advertising platform for marketplace sellers. Sellers will benefit from access to a larger and more targeted audience, improved ad targeting and measurement capabilities, and lower cost-per-impression and cost-per-click rates resulting from the combination of the two platforms' advertising inventory.
Cloud and Technology Infrastructure. The Transaction also presents opportunities for the consolidation of cloud hosting and data infrastructure. NovaMart's current agreement with Pinnacle Cloud Solutions Inc. for cloud hosting and data storage can potentially be renegotiated or consolidated with Cascade's own cloud infrastructure, yielding cost savings and operational efficiencies. Additionally, the combination of the two companies' data analytics capabilities is expected to improve the quality of market insights, trend analysis, and personalization algorithms available to both sellers and buyers.
B. Merger-Specificity
Dr. Johansson concludes that the efficiencies identified above are merger-specific — meaning that they could not be achieved, or could not be achieved to a comparable degree, through arm's-length contractual arrangements, joint ventures, or internal organic growth alone. This conclusion is based on several considerations:
• The logistics integration requires the unified management and optimization of a combined fulfillment network spanning NovaMart's 14 NovaShip facilities and Cascade's extensive distribution infrastructure. While partial integration could theoretically be achieved through a logistics partnership or joint venture, the full benefits of network optimization — including routing efficiency, inventory positioning, and facility utilization — can only be realized under common ownership.
• The combination of the two-sided platform network effects — connecting NovaMart's sellers with Cascade's buyers and vice versa — requires full integration of the marketplace platforms. A contractual arrangement (e.g., a referral or affiliate arrangement) would not achieve the seamless integration of seller listings, buyer accounts, payment processing, and fulfillment that is necessary to realize the full network benefits.
• The technology synergies, including the integration of NovaMart's search algorithm and seller tools with Cascade's ecommerce platform, require deep technical integration at the platform level that goes well beyond what could be accomplished through a licensing arrangement or technology partnership.
• The advertising efficiencies require the unification of the two platforms' advertising inventory and targeting data, which cannot be achieved through arm's-length arrangements due to data sharing restrictions, competitive sensitivities, and the need for real-time optimization across a unified platform.
C. Quantification
Dr. Johansson provides a quantified estimate of the efficiencies expected to result from the Transaction, based on internal data from Cascade and NovaMart and on his independent analysis. The estimated annual cost savings and revenue synergies are in the range of $45 million to $75 million, with the largest components attributable to logistics and fulfillment integration (estimated $20 million to $35 million annually), technology synergies and platform integration (estimated $10 million to $18 million annually), and advertising efficiencies (estimated $8 million to $14 million annually). These estimates are conservative and are based on assumptions that Dr. Johansson considers reasonable and well-supported by the available data. The methodology and supporting data for the efficiencies quantification are set forth in Appendix F to the Report.
Dr. Johansson further concludes that a significant portion of these efficiencies is expected to be passed through to consumers and sellers in the form of lower seller fees (take rates), better product selection, enhanced platform functionality, and faster delivery. The competitive dynamics of the market — including the presence of BrightBazaar Inc. and numerous other competitors — provide strong incentives for the combined firm to pass through cost savings and quality improvements to attract and retain sellers and buyers, rather than to capture them entirely as profit.
XII. Potential Divestiture Contingency (Brief Reference)
While Dr. Johansson's primary and strong conclusion is that no divestiture or other structural or behavioral remedy is warranted in connection with the Proposed Acquisition, the Report briefly addresses a potential divestiture contingency that the merging parties have identified in the event that the DOJ were to require a remedy as a condition of clearance.
Specifically, the merging parties have identified the NovaHome home décor vertical — NovaMart's dedicated marketplace vertical for home décor and home furnishing products — as a potential divestiture package. The NovaHome vertical represents approximately $620 million in GMV (approximately 10% of NovaMart's total FY2024 GMV of $6.2 billion) and includes a distinct seller community, a dedicated buyer audience, specific product categories, and associated fulfillment and logistics arrangements. The NovaHome vertical operates under a distinct brand within the NovaMart platform and could, with appropriate transition support, be carved out and operated as a viable standalone business by a qualified purchaser.
Dr. Johansson assesses that the NovaHome vertical possesses the characteristics necessary to constitute a viable standalone business: it has an identifiable and loyal seller base, a distinct buyer community, its own brand identity, and sufficient scale (at $620 million in GMV) to support independent operations. If divested, the NovaHome vertical would more than address any arguable competitive overlap between Cascade and NovaMart in the home décor subcategory, which is the product area with the greatest degree of overlap between the two companies' marketplace offerings.
However, Dr. Johansson emphasizes — and this memorandum concurs — that his strong recommendation is that no divestiture is necessary. The low combined market share (approximately 14%), the unconcentrated post-merger HHI (below 1,500), the de minimis predicted price effects (less than 0.5%), the low barriers to entry, and the significant procompetitive efficiencies all support the conclusion that the Transaction should be cleared without conditions. The divestiture contingency is identifi

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