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Oracle Corp. appears to have won another skirmish in its antitrust fight with the Justice Department, though it remains unclear whether the software company will be allowed to proceed with its $7.7 billion hostile tender for PeopleSoft Inc. U.S. District Judge Vaughn Walker suggested in an order released Monday that he will consider Oracle’s argument that the government’s primary legal theory for why the merger would harm competition is invalid. Oracle has said that the so-called unilateral effects theory — which holds that a merger may be anti-competitive if the remaining company could profitably raise prices a small but significant amount — lacks legal and legislative backing. The Justice Department has countered that the unilateral effects theory has been employed almost exclusively to stop anti-competitive mergers since 1992, when it was first articulated in the federal merger guidelines. The guidelines explain how antitrust enforcers apply the law to mergers. Walker said in his order, which is dated July 10, that the court is aware of only a few cases that address unilateral effects. He also notes that the merger guidelines lay out a framework for assessing unilateral effects cases. “This approach is one of several and appears to have received substantial criticism from antitrust scholars and little, if any, exposure in the crucible of litigation,” Walker wrote. The judge asked both sides to provide a “detailed analysis” of the unilateral effects argument and how the theory should be applied to the Oracle-PeopleSoft case. This should include references to court cases where this issue has been previously addressed, he said. Walker also said that the other major theory of competitive harm, known as “coordinated interaction,” does not appear to apply to this merger. For an acquisition to make collusion more likely after a deal, the companies must produce relatively homogenous products, and pricing must be transparent so companies can detect cheating by their rivals. Walker said that does not appear to be the case with the sophisticated enterprise software at issue in the Oracle matter. Deputy Assistant Attorney General Tom Barnett said Tuesday that the judge’s demand for more information is typical in complicated cases and does not suggest the court is leaning toward either side’s position. “The judge’s order is not an unusual request for a clarification of what the law is,” he said. “I don’t read anything one way or the other into it.” An Oracle spokeswoman was not immediately available for comment. The judge’s order was released on the same day that the companies were to file their post-trial briefs. Walker said he wanted those briefs to address the issues raised in his order, which was given to the parties on July 9. Public copies of those briefs are expected to be released shortly. Antitrust experts cautioned against assuming the order means either side will prevail on the merits of the case. If the judge believed Oracle’s defense was a slam dunk, one source noted, then he would not need to address the issue of whether the unilateral effects theory is valid. Yet the judge also could have serious questions about the theory, a positive for Oracle, and Walker wants to ensure the parties focus fully on the topic before he writes an opinion the government is likely to appeal. The Justice Department sued last year to block Oracle’s hostile bid for PeopleSoft, arguing that they are two of only three companies that provide sophisticated human resources and financial management software to big businesses. A nearly four-week trial was held in June. The judge is expected to rule in August. Copyright �2004 TDD, LLC. All rights reserved.

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