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EC opens up Oracle case

Tags:
Hostile Takeover,
PeopleSoft,
Oracle

Dawn Kawamoto CNET News

Published: 13 Sep 2004 10:25 BST

European antitrust regulators on Friday began combing through a federal court ruling in the controversial antitrust case against Oracle, comparing notes as they decide whether to issue their own challenge to the deal.

Thursday's federal court ruling gave Oracle a green light to pursue its hostile takeover of PeopleSoft -- a move that the Justice Department had contested on antitrust grounds. If the European Commission, which acts as the antitrust regulatory agency for Europe, follows the Justice Department's lead, it could stall or kill the planned buyout.

"This ruling will have some impact on what the Commission does," said Stan Gorinson, an antitrust attorney with Kilpatrick Stockton and former antitrust official with the Justice Department. "The Commission has lost several significant cases in the Court of First Instance, because they couldn't back up its economic analysis. The Commission has to look over its shoulder now to see how the Court of First Instance will view any case. And, at this point, Oracle has demonstrated a good case."

The Commission, which in March issued a statement of its objections to the merger, has yet to make a final decision on whether to block the deal.

The Court of First Instance allows parties to contest decisions issued by the European Commission. One notable antitrust decision that will go before the court's president, in a separate case, involves Microsoft. The software giant is seeking a stay of remedies the Commission ordered. The Commission is asking Microsoft to provide a version of its operating system without the Windows Media Player and to share enough of its intellectual property with server rivals to allow them to offer machines loaded with Windows.

Oracle declined to comment on the European Commission's review of its merger proposal.

In May, the Commission was set to make its final decision, but that decision was delayed when Oracle failed to provide requested documents. The deliberations will not be restarted until the Commission receives those papers, which could take days or weeks, said Amelia Torres, a European Commission spokeswoman.

She noted that the Commission does not comment on rulings issued by judges in other cases, particularly overseas cases.

"We have to make our own assessment," Torres said. "We have been following the US case against Oracle and will read the judgment carefully."

In the US case, Ninth Circuit US District Court Judge Vaughn Walker said the government had failed to prove its case in key areas of antitrust law. Justice Department officials had to show that competition in relevant product and geographic markets would be substantially diminished if Oracle acquired PeopleSoft.

"Walker's ruling is based on the assumption that Microsoft and others are credible competitors. That area will be of some interest to the Commission," said one antitrust attorney with a European firm. "If the Commission disagrees with him, they would rule against the deal because it's a three-to-two merger."

That means the Commission believes the deal would reduce the major industry players to two from three. Some observers have said that it could be harder for the Commission to make an antitrust case in Europe, where SAP has an even bigger presence than in the United States.

European antitrust attorneys have mixed opinions on how much weight Walker's ruling will have with the Commission.

"I think the Commission will approve the deal," said Frank Fine, an antitrust attorney based in Brussels. "They will not second-guess what the judge did. It's a politically sensitive case and there is no indication yet on whether the Justice Department will appeal the decision."

Other antitrust attorneys said the Commission faces no political fallout, no matter what its decision will be. That's because the Commission can point to either the Justice Department's actions or Walker's ruling to show the United States reached similar conclusions.