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ee) 10 ul 12 B 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 |Claude F. Scott, Esq, Pam Cole, Esq. (CA Bar No. 208286) Joseph M. Miller, Esq, wen M. Kendler, Esq S. DEPARTMENT OF JUSTICE, ANTITRUST DIVISION i50 Golden Gate Avenue, Rm. 10-0101 san Francisco, CA 94102-3478 415) 436-6660 (415) 436-6683 (Fax) ttorneys for Plaintiff the United States of America Iso filed on behalf of 10 Plaintiff States (See signature block) UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION +) ) Juntred STATES OF AMERICA, et al., ) CASE NO. C 04-0807 VRW_ ) Plaintiffs, ) Filed June 1, 2004 ) v. ) PLAINTIFFS’ TRIAL BRIEF RACLE CORPORATION ) ) Defendant. ) ) 7 FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER ENTERED ON APRIL 13, 2004 CONTAINS HIGHLY CONFIDENTIAL INFORMATION TO BE OPENED ONLY BY OR AS DIRECTED BY THE COURT Sewrd aus uw 12 1B 14 15 16 7 18 19 20 2 22 23 24 2s 26 a 28 TABLE OF CONTENTS INTRODUCTION oo Seo99659995550550 eel THE DEFENDANT AND THE TARGET COMPANY . 2 A. Oracle 2 BL PeopleSoft..........+ cette 2 [l. THE TRANSACTION 2 Il. THE PRODUCTS AND INDUSTRY BACKGROUND . ce) A. Background 3 B. ERP Products: High-Function and Mid-Market Compared .......0006060000000ees 4 C. The Sales Process SbossunebuGde cece 6 D. The Total Cost of Ownership, and the License Fee epuecbonscoe’) E__ESAsare Mission Critical Software Applications Chosen by Risk Averse C108... qpoo00deodoconeaHonH() IV. LEGAL FRAMEWORK FOR ANALYZING TRANSACTIONS UNDER, SECTION 7 OF THE CLAYTON ACT RELEVANT MARKETS: HIGH-FUNCTION HRM AND FMS SOFTWARE, SOLD IN THE UNITED STATES , 10 ‘A. Product Markets ...........0.sseeeeeeeeeeees ceceeeeeeee 10 1. Legal Framework ........ 10 2. Application of the Standards ebuebcuuebuusoe 2B a. A Hypothetical Cartel of Oracle, PeopleSoft and SAP Selling High-function HRM and FMS Products Would be Successful ..... Soacodg 4 1. Oracte’s Own Business Documents Show that PeopleSoft and SAP are its Closest Competitors, imary Pricing Constraints . . . weld 2. The Big 5 Testimony Will Confirm Market Definition we dS 3. Outsourvers use Oracle, PeopleSoft or SAP as their HR Platforms for Clients Which Demand Global Functionality... . ceceeeeee IS b. Mid-Market Softvare is not a Subst for High Function Software ceeee 16 ii Cgc no Coto Va Camera neaun 10 ul 12 13 4 15 16 7 18 19 20 21 2 23 24 25, 26 27 28 HL B, The Relevant Geographic Market Is the United States . ANTICOMPETITIVE EFFECTS <......2222++ ‘A. Inference from Highly Concentrated Market Structure B. Unilateral Effects... 1. Past as Prologue — Real World Evidence Showing How Consumers Will be Harmed by this Transaction 7 a. Greyhound b. Hallmark pnobodeeone ooacsonbncrooopo%o0uode 2, Differentiated Products and Next Best Substitutes 3. Oracle’s Acquisition Would Likely Result in Higher Prices 4. Arbitrage Will not Protect Consumers C. Harm to the Installed Base of Customers... oe ORACLE’S ATTEMPTS TO REBUT THE PRESUMPTION OF ANTICOMPETITIVE EFFECTS . ‘A. Entry Is Not Likely to Prevent Anticompetitive effects 1, J.D, Edwards’ Failed Entry Attempt, Despite Hundreds of Millions of Dollars, Years of Research & Development anda Strong Mid-Market Product . 2. Microsoft Will Not Enter the Market 3. Niche Vendors, Such as Lawson and AMS, Will ‘ot Repostion o Compete Outside Thts Narow ‘Areas of Expertise . B. Changing the Subject: the Technology Stack .....+-.+60000+ C. Some Customers do not Demand High-function Products ‘THE DEFENDANT'S ALLEGED EFFICIENCIES DO NOT CURE, ‘THE COMPETITIVE HARM 5 A. Alleged Efficiencies are not Verifiable B, Alleged Efficiencies Attributable to Reduction in Output are not Cognizable C. Defendant's Alleged Efficiencies do not Account for the ‘Transaction’ Integration Costs and are not all Merger Specific ‘THE PLAINTIFF STATES HAVE MET THEIR STANDING REQUIREMENTS . iil (cana Com 17 18 18 19 19 «20 -20 --21 fas a --25 --25 33 34 35 36 36