DOJ, Oracle Pitch Their Points in Final Briefs

By John Pallatto  |  Posted 2004-07-09 Print this article Print

Before closing arguments set for July 20, the Department of Justice and Oracle each submit their best reasoning in the government's lawsuit seeking to block Oracle's hostile buyout of PeopleSoft.

The U.S Department of Justice and Oracle released their "conclusions of law and fact" Friday, with each stating why it should prevail in the governments antitrust lawsuit seeking to block Oracles hostile buyout of PeopleSoft.

The briefs, filed in U.S. District Court in San Francisco, will be the basis for closing arguments before U.S. Ninth District Judge Vaughn Walker scheduled for July 20. Walker will study the briefs as he considers whether the government has proved its case that the Oracle Corp.-PeopleSoft Inc. merger is anticompetitive.

Court observers have said it may take Walker one to two months to render a verdict in the case.

In its 15-page brief, the DOJ argued that the buyout would effectively give Oracle a 47.4 percent share of the U.S. market for "high-function" financial management software. It would have a 69.7 percent share of the U.S. market for human resources management software. These levels are "significantly above" the legal guidelines established in earlier antitrust cases, the DOJs brief said.

The DOJ defended its definition of the "high-function" enterprise application software market, stating that the court shouldnt include companies such as Microsoft Corp., Lawson Software Inc. and American Management Systems Inc., which it says sell products to SMBs (small and midsized businesses) rather than to the largest corporations.

Oracle "has not offered sufficient evidence that the entry or repositioning" by these companies "would be timely, likely and of sufficient magnitude to replace the competition lost" though Oracles buyout of PeopleSoft.

Any claims that the buyout would result in market efficiencies "will not overcome the anticompetitive effects" of the transaction, the DOJ held.

The government rejected Oracles argument that it needs the money and ongoing cash flow it would gain from the merger to fund future growth to stay competitive with IBM and Microsoft. Federal law requires that any efficiency gained must "reverse the anticompetitive effect, not that the transaction will provide some net social benefit," the DOJ argued.

The government also argued that the buyout would "substantially lessen" competition in the United States, which is the only appropriate market "in which to analyze the competitive effects" of the buyout.

Next Page: Would a merger chill competition or innovation?

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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