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Werden, Gregory J. --- "Unilateral Effects from Mergers: The Oracle Case" [2006] ELECD 518; in Marsden, Philip (ed), "Handbook of Research in Trans-Atlantic Antitrust" (Edward Elgar Publishing, 2006)

Book Title: Handbook of Research in Trans-Atlantic Antitrust

Editor(s): Marsden, Philip

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845421816

Section: Chapter 1

Section Title: Unilateral Effects from Mergers: The Oracle Case

Author(s): Werden, Gregory J.

Number of pages: 15

Extract:

1 Unilateral effects from mergers:
the Oracle case
Gregory J. Werden1


At the end of 2004, Oracle Corp. announced the completion of an acquisi-
tion begun over 18 months earlier with its tender offer jfor the shares of
PeopleSoft, Inc. The acquisition had been challenged by the US Government
and several states primarily on the grounds that it would have significant uni-
lateral (non-coordinated) anticompetitive effects.2 On 9 September 2004, fol-
lowing a 19-day trial and extensive briefing, Judge Vaughn Walker held that
the government failed to establish that the acquisition would violate US
antitrust law, and the government did not appeal his decision.
The Oracle decision3 was the first to provide an extensive discussion of uni-
lateral effects, and it is highly significant that Judge Walker was receptive to
unilateral effects theories and to the use of economic theory in analyzing and
quantifying unilateral effects. But these positive aspects of his decision could
be overshadowed by shortcomings in its articulation of the relevant economic
analysis. Judge Walker inaccurately stated the conditions under which a
differentiated products merger gives rise to significant unilateral effects, and
he took an overly narrow view of the range of valid unilateral effects theories.
The discussion below first briefly summarizes the US Government's view
of competition between Oracle and PeopleSoft and its unilateral effects
theory. That summary serves as a foundation for an assessment of Judge
Walker's treatment of unilateral effects, which curiously never addressed the
specific theory the government ...