July 13, 2004 3:52 PM PDT
Oracle, Justice Dept. write up opposing views
The Justice Department is suing Oracle to block the software company's proposed hostile takeover of PeopleSoft. The government says the $7.7 billion merger would raise prices on software large companies use to streamline accounting and human resources tasks. Oracle counters that the merger will help it survive mounting competition from IBM, Microsoft and SAP in a retrenching market.
The set of "post-trial briefs" came one week ahead of the trial's closing arguments, set for July 20 in U.S. District Court in San Francisco. The documents seek to crystallize four weeks of courtroom testimony, which concluded July 1, and demonstrate how it applies to antitrust law. A verdict from Judge Vaughn Walker is expected by September.
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In its 56-page document, Oracle argued that the government had violated the principles of sound antitrust analysis. The company use harsh language to criticize the government's case, calling the merger challenge "divorced from the realities of the marketplace" and casting the Justice Department's market parameters as "contrivances."
Oracle also attacked the government for mixing elements of two antitrust theories to prove its case, but failing to prove either fully. Walker also cited this dual-theories issue in a court order he filed on Monday, asking each party to clarify which antitrust model best fits the case and make separate arguments for each.
One model, called coordinated effects, deals with the increased likelihood of collusion as a result of a merger. The other, unilateral effects, relates to the way a merger could limit competition for unique products by combining the closest substitutes.
The Justice Department, in its 61-page document, said its case is based primarily on unilateral effects theory. "By eliminating head-to-head competition between Oracle and PeopleSoft, the proposed acquisition would cause Oracle to offer (less significant) discounts to U.S. customers," the government states. "Oracle would find it in its interest to raise prices, without any coordination with its remaining rival."
Oracle states in its brief that complex competitive dynamics would restrain its market power if it were to buy PeopleSoft. "Oracle would still face many potent competitive constraints--not only SAP, but Lawson, AMS, increasingly Microsoft, and the whole range of outsourcing providers," Oracle states.
"Oracle would still be negotiating with buyers possessing leverage and power of their own, who nearly always already have existing financial manage systems and human resource management systems," the Oracle document continues.
Oracle extended its $7.7 billion all-cash offer for PeopleSoft on Monday. The $21-per-share offer was set to expire on July 16. PeopleSoft shareholders now have until Aug. 27 to tender their share to Oracle.