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Now that Oracle has defeated the U.S. Department of Justices attempt to permanently block the PeopleSoft buyout, speculation has already begun about whether this decision will encourage the European Union regulators to approve the deal.
The European Commission heard much of the same evidence that U.S. District Judge Vaughn Walker heard before he issued his Sept. 9 ruling finding that the government had failed to prove that Oracles $7.7 billion tender offer for PeopleSoft violated federal antitrust law.
Observers have suggested that the European Commission, reviewing much the same evidence, will follow similar legal logic and approve the buyout deal. Even if the European Commission rejects the buyout, the U.S. court decision makes it seem more likely that Oracle would win on appeal.
However, one U.S. lawyer says it is risky to assume that the commission naturally will align its decision with a U.S. court ruling. “The main thing is the definition of marketplace, and the European Commission is going to have a different definition,” said Bob Camors, a commercial litigation specialist with Thelen, Reid & Priest LLP, in San Jose, Calif.
Judge Walkers decision, Camors said, is focused on the U.S. market and law. The European Union is going to be looking at how the merger is going to affect competition in the European market and will not necessarily give a lot of weight to U.S. court decision, “Even if it does include findings of fact” that are similar to what has been presented to the European Commission, Camors said.
Another key difference is that SAP has to be regarded as the leading seller of enterprise application software in Europe, with considerably more market share than Oracle has today, Camors said. The European Commission may look at whether an Oracle-PeopleSoft merger will upset the competitive balance in Europe.
But it is hard to see how the EC can ignore the findings of fact and law in the U.S. case.
Judge Walker rejected the Justice Departments argument that the market for “high-end” enterprise application software was limited to Oracle, PeopleSoft and SAP. He cited the testimony of Perry Keating, a vice president of international management consultant BearingPoint, to help explain why he rejected this argument.
Keating testified in the Oracle antitrust trial supporting the government position that the high-end market included Oracle, PeopleSoft and SAP. BearingPoint offered the exact same opinion in a questionnaire prepared for the European Commission. Keating had a hand in preparing BearingPoints responses to the questionnaire.
Walker noted in his decision that, under cross examination, Keating conceded that Microsoft had the ability to push into the enterprise human resources and enterprise resource planning market. “Once the topic turned to the likelihood of entry into the market of vendors other than SAP, Oracle or PeopleSoft, Keatings testimony began to undermine BearingPoints response to the EC,” Walker wrote in his decision.
Next Page: Challenging the market definition.
Defining the market
It was also clear that it was Microsofts intention to enter the enterprise market when it discussed a potential merger with SAP after hearing about Oracles tender offer for PeopleSoft, as Keating conceded in his testimony.
The European Commission cant ignore the testimony in the U.S. case when it considers the credibility of the “Big Three” market definition that has been presented on both continents.
European regulators are no different from their U.S. counterparts. They are sensitive to public opinion and the shifting tides of political influence. But at this point it is hard to believe that the European Commission will reject the buyout and make it stick. Such a decision would likely just result in another appeal and another trial using much the same evidence, arguments and expert opinion that has already been presented in the U.S. court.
The result will probably be the same: The European regulators will find it no more easier to prove its case than the U.S. Justice Department. Oracle will win the case and the right to keep pursuing PeopleSoft.
But once again, there will be another delay of at least half a year while Oracle pursues the appeal. The longer the case goes on, the more market uncertainty PeopleSoft has to deal with. PeopleSoft may find that its market share and financial condition will continue to erode while it is held hostage by the interminable legal maneuvers.
The delay doesnt hurt Oracle one way or another. The repeated delays could wear down PeopleSofts resistance until it finds it has no choice but to accept the deal. Even if Oracle never succeeds in buying PeopleSoft, the delays will have seriously disrupted its business plans and perhaps permanently stunted its growth.
SAP hasnt officially expressed an opinion on the buyout. But there are indications that SAP wouldnt mind clearing the field of a pesky competitor any more than would Oracle. With PeopleSoft out of the way, SAP will find it easier to solidify its own position in Europe and might find it easier to make inroads into the North American market.
One thing is clear: Through all of these legal maneuvers, PeopleSoft cant expect any help from the courts on either side of the Atlantic. It will have to rely entirely on its own resources – including the goodwill of its shareholders and the determination of its board of directors to remain an independent company.
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