Oracle and the U.S. Department of Justice (DOJ) filed their closing trial briefs late Tuesday in the government's case to block Oracle's hostile takeover of PeopleSoft, paving the way for closing arguments next week.
The DOJ is suing to block the US$7.7 billion merger on the grounds that it would stifle competition in the market for human resources and financial management software used by large corporations, leading to higher prices. Oracle says it needs the acquisition to thrive in a highly competitive market.
The post-trial briefs, filed late Tuesday, essentially sum up the arguments made by each side during the month-long trial, incorporating evidence and testimony from witnesses and applying it all to antitrust law. At the core of the case is whether the government has properly defined a market for complex, "high function" applications that will be harmed by the merger.
The DOJ argued in its brief that it has identified a segment of customers for whom Oracle, SAP AG and PeopleSoft are the only viable vendors for certain core business applications. It cited testimony from customers who said they believe that prices will rise and product quality diminish if the deal goes through.
The DOJ said its case is based primarily on a "unilateral effects" theory. Roughly put, the theory states that when products supplied by two merging companies are closer competitors than other available substitutes, the post-merger firm would be able to unilaterally raise prices. The government discounts SAP in this context because, it argues, the German vendor is not a strong competitor for many U.S.-based companies.
"By eliminating head-to-head competition between Oracle and PeopleSoft, the proposed acquisition would cause Oracle to offer lower discounts to U.S. customers" for its high function human resources and financial management software, the government wrote. "Oracle would find it in its interests to raise prices, without any coordination with its remaining rival."
Oracle countered that U.S.-based companies regularly buy software from overseas vendors, and said the case involves "a textbook global market." A merged Oracle-PeopleSoft would still be less powerful than SAP, making unilateral effects theory inapplicable to the case, its lawyers wrote.
"Antitrust law does not permit a finding that a merged firm facing a substantially larger rival (SAP in this case) could excercise unilateral market power," Oracle's lawyers wrote.
It also slammed the government, as it did throughout the trial, over its definition of "high function software." The government invented the term in the hopes of defining a market that will be harmed by the acquisition, and did so through select customer examples rather than any accepted industry criteria, Oracle argued.
"It is a market definition in chaos; never has a merger case, let alone a successful merger challenge, rested on such an 'amorphous' market definition," Oracle's lawyers wrote.
Were the merger to go ahead, they argued, Oracle would still face "many potent competitive restraints -- not only SAP, but Lawson (Software), AMS (American Management Systems), increasingly Microsoft and the whole range of outsourcing providers."
Lawyers for the two sides will now prepare for closing arguments, scheduled for July 20 in San Francisco federal court. Judge Vaughn Walker is expected to deliver a verdict in the case in August or September.