Submission of the briefs sets the stage for closing oral arguments scheduled for July 20 in U.S. District Court in San Francisco. The government is seeking a permanent injunction to block Oracle Corp.s proposed $7.7 billion buyout of enterprise application software rival PeopleSoft Inc.
The DOJ asserted in its filing that every witness, whether called by the government or by Oracle, "testified that Oracle, PeopleSoft and SAP [AG] are the only three firms that develop and sell high-function human resources management and financial management software."
DOJ and Oracle have wrangled relentlessly over whether the term "high function" has any meaning in the software industry and whether there is a distinct market for such enterprise application software.
In its latest brief, Oracle asserted that "there is no such thing as high-function software." The term, it said, represents "the governments third or fourth effort at a market definition, and the latest in a series of efforts to engineer markets consisting, on the buy side, solely of large and complex enterprises, and more importantly, markets with only three sellers: SAP, Oracle and PeopleSoft."
In its brief, the government contended that "the harm threatened by the proposed acquisition is substantial and involves at least [$500 million] in commerce annually" in higher prices for enterprise human resources and financial management software. "Customer after customer testified without contradiction that they expect prices to rise substantially and the quality of products they receive to diminish if the merger is not stopped," the DOJs brief said.
The government also rebutted Oracles claim that other surviving companies such as Microsoft Corp. would replace PeopleSoft in the market and maintain the competitive pace."The actual evidence establishes that Microsoft has no intention of expending its resources on entering" the enterprise market, the governments brief asserted. "Even if it did, it could not do so for many years," it concluded.
Oracle claimed that software buyers demonstrate their ability to hold down software prices through direct negotiations with vendors.
The government, Oracle noted, "continues to press a three bidders are needed theory despite the fact that, every day, buyers in these markets defy that tenet by choosing to negotiate prices on multimillion-dollar EAS systems with just one or two potential suppliers."
There is no evidence that this practice leads to higher prices, Oracle claimed, because "obviously the practice would not persist if it did."
Furthermore, Oracle contended that it will face sustained competition, not only from SAP and Microsoft but also from smaller players such as Lawson Software Inc. and American Management Systems Inc.
Oracle concluded by claiming that the government has failed to show that the merger would allow it to exercise "unilateral market power" in a clearly defined antitrust market. As a result, it said, "the proposed acquisition is no threat to competition" and the court should deny the government request for a permanent injunction barring Oracles buyout of PeopleSoft.
Once closing arguments are heard, it will likely take Judge Walker one to two months to render a decision.