Court Raises Bar for Market Definition in Oracle/PeopleSoft Decision

On September 9, 2004, U.S. District Court Judge Vaughn Walker handed the Department of Justice (DOJ) a major defeat by rejecting its attempt to enjoin Oracle Corporation from acquiring PeopleSoft, Inc. In doing so, he significantly raised the bar for the government in defining markets in differentiated products.

Despite the large number of vendors of enterprise application software, the government had challenged the acquisition as a “3 to 2” merger that would cause prices to rise through both unilateral and coordinated effects. The government’s theory was that the product market should be narrowly defined as “high function” human relations management and financial management systems software, and that the geographic market should be limited to the United States. Judge Walker’s decision found that the government failed to carry its burden of proof in virtually every respect: he found that the DOJ had failed to define an appropriate product market; he rejected the government’s contention that the geographic market was limited to the United States, and specifically found that a global market existed; he discounted customer testimony proffered by the government as speculative and self-serving; and he found that the DOJ “wholly failed to prove the fundamental aspect of a unilateral effects case.” Practically the only positive note for the DOJ was that the court rejected the defendant’s efficiencies defense.

For the full story, please view the PDF.