The Oracle matter was a Horizontal Merger challenge under Section 7 of the Clayton Act. The Antitrust Division of the U.S. Department of Justice, joined by ten states, sued to enjoin Oracle Corporation’s (“Oracle”) acquisition of PeopleSoft, Inc. (“PeopleSoft”), which Oracle pursued through a 2003 tender offer. Oracle and PeopleSoft were leading providers of enterprise application software and, together with SAP, supplied many of the high-end human resources management (“HRM”) and financial management system (“FMS”) applications used by large organizations.
The government alleged that the acquisition would substantially lessen competition in a market limited to high-function HRM and FMS software sold in the United States by reducing significant competitors from three to two and increasing the likelihood of coordinated conduct between the merged firm and SAP, as well as unilateral price increases by the merged firm. The defendants disputed the government’s proposed market definition and contended that the merger would generate substantial cost-saving efficiencies.
On behalf of the government, Professor Zmijewski, supported by Keith Bockus, analyzed the merger efficiencies Oracle claimed, including projected annual cost savings exceeding $1 billion. Professor Zmijewski assessed the efficiency calculation against three criteria: whether it rested on adequate documentation; whether its assumptions and inputs had a verifiable factual foundation; and whether it employed standard, appropriately applied methodologies. He evaluated whether Oracle’s calculation of the claimed efficiencies were verifiable, excluded savings already attainable from PeopleSoft’s earlier acquisition of J.D. Edwards; and analyzed whether Oracle’s claimed savings were independent of the projected decline in PeopleSoft and J.D. Edwards output that its own model assumed.
Following a multi-week bench trial before Chief Judge Vaughn R. Walker, the court denied the injunction, concluding that the government had failed to establish the relevant product market confined to high-function HRM and FMS software. The Court nevertheless found that Oracle’s efficiency evidence was flawed and unverifiable, and that the management estimates underlying the claimed efficiencies were too speculative to credit.