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In a warning to merging companies to keep competing until a deal closes, the Department of Justice filed a lawsuit Sept. 28 against Computer Associates International Inc. over its 2-year-old purchase of Platinum Technology International Inc. The Justice Department said Sept. 28 that the merger agreement between CA and Platinum imposed “extraordinary conduct of business restrictions” on the seller, preventing the companies from competing while regulators reviewed the deal. Islandia, N.Y.-based CA bought Platinum in early 1999 for $3.5 billion cash. Specifically, the DOJ claims that, prior to the merger closing, Oakbrook Terrace, Ill.-based Platinum needed CA approval before entering certain contracts with customers and that a CA employee was installed at Platinum headquarters to review customer contracts and other management decisions. The conduct, known as “gun jumping,” violates the pre-merger review structure established under the Hart-Scott-Rodino Act of 1976 and the Sherman Act, Justice said. The review period is designed to give officials with DOJ and the Federal Trade Commission time to investigate proposed transactions for possible antitrust violations. “By assuming control of Platinum before the expiration of the required waiting period while the Justice Department was investigating the legality of the proposed acquisition, CA failed to obey the law,” said Assistant Attorney General Charles James in a statement. “This conduct prematurely reduced competition between the companies.” Justice is seeking $1.27 million in civil penalties, or $638,000 apiece from CA and Platinum, and a ban on CA from engaging in similar conduct in the future. CA officials were unavailable for comment. In a statement, the company called the Justice Department’s actions “arbitrary” and said it would defend itself vigorously. CA said the provisions of its deal for Platinum were “virtually identical” to provisions it used in other deals, “many of which had been thoroughly investigated and passed upon by the DOJ.” Justice officials originally challenged the CA-Platinum deal in May 1999 because of antitrust concerns, but the case was settled when CA agreed to divest Platinum products and assets in six software markets. Robert Lande, a University of Baltimore law school professor, said he believes this case is most likely an isolated incident and not a sign of a new regulatory crackdown. “Frankly, most people are too sophisticated to do this,” he said. “They have counsel to tell them what not to do, and they don’t do it.” Copyright (c)2001 TDD, LLC. All rights reserved.

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