Source: http://www.justice.gov/atr/cases/f203200/203282.htm
Timestamp: 2014-08-23 11:41:33
Document Index: 485825683

Matched Legal Cases: ['§ 18', '§ 25', '§ 26', '§ 18', '§ 22', '§ 1331', '§ 22', '§ 1391', '§18', '§\n2']

First Amended Complaint : U.S., et al. v. Oracle Corporation
This document is available in two formats: this web page (for browsing content),and PDF (comparable to original document formatting). To view the PDF you will need Acrobat Reader, which may be downloaded from the Adobe site. For an official signed copy, please contact the Antitrust Documents Group. R. HEWITT PATE
CA Bar No. 89744 PAMELA P. COLE
CA Bar No. 208286 PHILLIP R. MALONE
Counsel for Plaintiff United States of America GREG ABBOTT, Attorney General
St. Paul, Minnesota 55101-2130 Telephone: (651) 296-2921
TODD A. SATTLER, Assistant Attorney General Consumer Protection and Antitrust Division
MICHAEL COX, Attorney General
Paul F. Novak, As sist ant Attorney General in Charge
Telephone: (517) 335-4809
Facsimile: (517) 373-9860
Counsel for Plaintiff State of Michigan
Telephone: (614) 466-4328
Facsimile: (614) 995-0266
Steven M. Rutstein, Assistant Attorney General
Department Head, Antitrust Department Clare E. Kindall, Assistant Attorney General
Telephone: (860) 808-5169
Facsimile: (860) 808-5033
OF TEXAS, STATE OF HAWAII, STATE
OF MARYLAND, COMMONWEALTH
OF MASSACHUSETTS, STATE OF
MINNESOTA, STATE OF NEW YORK,
STATE OF NORTH DAKOTA, STATE OFCONNECTICUT, STATE OF MICHIGAN
and STATE OF OHIO	Plaintiffs,
No. C. 04-0807 VRW
United States, and the State of Texas, the State of Hawaii, the State of Maryland, the
Commonwealth of Massachusetts, the State of Minnesota, the State of New York, the State of
North Dakota, the State of Michigan, the State of Connecticut and the State of Ohio, acting under
the direction of their respective Attorneys General ("Plaintiff States"), bring this civil action to
enjoin permanently the proposed acquisition by Oracle Corporation ("Oracle") of PeopleSoft,
Inc., ("PeopleSoft"), pursuant to Oracle's proposed acquisition of PeopleSoft. The United States
and the Plaintiff States allege as follows:
1.	Unless it is enjoined, Oracle's proposed acquisition of PeopleSoft will substantially
increase already high concentration among vendors that sell high function Human Resource
Management (HRM) software and high function Financial Management Services (FMS) software
purchased by organizations for use in the United States and abroad. More specifically, the
proposed transaction will eliminate aggressive head-to-head competition between Oracle and
PeopleSoft, in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. Such a
reduction in competition is likely to result in higher prices, less innovation and decreased support
for these high function integrated software applications.
2.	This complaint is filed and this action is instituted under Section 15 of the Clayton Act,
as amended, 15 U.S.C. § 25, to prevent and restrain the defendant from violating Section 7 of the
3.	The Plaintiff States bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26,
to prevent and restrain the violation by defendants of Section 7 of the Clayton Act, as amended
15 U.S.C. § 18. The Plaintiff States bring this suit pursuant to their statutory, equitable and/or
common law powers as common law parens patriae on behalf of their respective states' business
and property, citizens, general welfare and economies. Many of the states also represent
governmental entities in their proprietary capacities, which may include state departments,
bureaus, agencies and political subdivisions that have purchased or are likely future purchasers of
high-function HRM and FMS software. This proposed acquisition threatens loss or damage to
the business or property, as well as the general welfare and economies, of each of the Plaintiff
States, and to the citizens of each of the Plaintiff States. Plaintiff States' governmental entities
and their citizens will be subject to a continuing and substantial threat of irreparable injury to
their business or property, and to the general welfare and economy, and to competition, in their
States unless the defendant is enjoined from carrying out this proposed acquisition.
4. The defendant is engaged in interstate commerce and in activities substantially affecting
interstate commerce. The defendant sells its products throughout the United States. Oracle's
sales in the United States, and in each of the Plaintiff States, represent a regular, continuous and
commerce as well as commerce with and in each of the Plaintiff States. This Court has subject
matter jurisdiction over this action, and jurisdiction over the defendant, pursuant to Sections 12,
15 and 16 of the Clayton Act, 15 U.S.C. §§ 22, 25 and 26, and 28 U.S.C. §§ 1331, 1337(a) and
5. The defendant transacts business and is found within the Northern District of California.
Venue is proper in this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c).
6.	Intradistrict Assignment: Oracle Corporation's worldwide headquarters is located in San
Mateo County, California. Pursuant to Civil Local Rule 3-2, all civil actions arising in San
Mateo County shall be assigned to the San Francisco Division or the Oakland Division of the
7.	Oracle is a Delaware corporation with its principal executive office in Redwood City,
California. Oracle provides organizations with database technology, enterprise software
applications and related consulting services, in the United States and abroad. In 2003, Oracle
earned over $9 billion in revenues, including over $2 billion of revenues related to enterprise
8.	PeopleSoft is a Delaware Corporation with its principal executive office in Pleasanton,
California. PeopleSoft provides organizations with enterprise software applications and offers
Complaint related consulting services in the United States and abroad. PeopleSoft earned over
$2 billion in revenues in 2003, comprised entirely of enterprise software applications-related
9.	In today's global economy, the ability to reduce the costs inherent in running an
organization is vital to an organization's success. Most organizations (including corporations,
federal, state, and local government agencies, and non-profit organizations) automate their
financial management and human resource functions in order to provide better products and
services to their customers or constituencies and to enhance shareholder and taxpayer value
through more efficient operations. The software used to accomplish these tasks varies greatly
depending on the needs of the customer. For example, while a small business' needs may be met
by simple retail PC-based software (often referred to as an "off the shelf" solution), a large
corporation may require a multimillion dollar software solution that is configured to the
organization's needs and can perform these important functions seamlessly and simultaneously
across multiple divisions or subsidiaries, multiple lines of business, and multiple legal
jurisdictions. Customers with requirements for a product that can support such a multifaceted
organization typically invest significant resources into identifying, purchasing and implementing
software solutions that can be configured to meet the requirements of the individual organization. As described in more detail below, customers with the most demanding requirements typically
find that the set of vendors that can meet their requirements is limited to Oracle, PeopleSoft and
one other firm, Germany's SAP AG.
10.	There is a variety of enterprise software products that organizations use to automate
different types of business functions. Among others, enterprise software can be used to (1)
manage employees through HRM software and (2) maintain financial records through FMS
11.	Some organizations, while requiring enterprise software with deeper functionality than
that provided by "off the shelf' PC-based software, still have relatively straightforward, simple
business processes and data processing and reporting requirements. Enterprise software vendors
often refer to these organizations as the "mid-market" or "general business market."
12.	While enterprise software products that serve the "mid-market" or "general business
market" often must be professionally installed and maintained, they are relatively inexpensive. These products have limited capacity to support customers with diverse operations such as
multiple geographic locations, distinct legal entities or business units within the organization, or
numerous lines of business. As these products have a limited set of configuration options, the
implementation costs associated with this software are comparatively modest.
13.	While "off the shelf" and "mid-market" solutions are used for the simpler application
needs of most organizations, many customers, due to their internal structure and unique
administrative processes, must also invest in higher function products. These higher function
products have the capability to support the unique requirements of each customer across diverse
and multi-faceted organizations.
14.	Customers with high-level functional needs ("enterprise customers") require products
("highfunction enterprise software") that can support their ongoing business processes and
reporting requirements that may stretch across multiple jurisdictions (often requiring support for
foreign languages and reporting requirements), multiple legal entities or divisions within the
organization and multiple lines of business. These products must have the scale and flexibility to
support thousands of simultaneous users and many tens of thousands of simultaneous
transactions, and the ability to integrate seamlessly into bundles or "suites" of associated HRM
and FMS functions. Most importantly, these products must have the flexibility through
configuration options or other means to be matched to the administrative and reporting processes
of each unique customer.
15. Vendor characteristics are also important to enterprise customers when identifying their
supplier options. Enterprise customers demand a product that has a wide range of functional
options available so that they have the option of purchasing additional functional modules to
expand the automation of their business or governmental processes. Enterprise customers also
expect periodic updates, for example, keeping the software current regarding local tax and
employment laws in every state and country in which they operate. In addition, enterprise
customers purchase ongoing maintenance and support. In return, enterprise customers expect 24-hour technical support to be available to them in every country in which they operate. Consequently, enterprise customers will not consider a vendor that lacks the resources necessary
to provide continuous technical support and to continuously enhance and expand the functional
footprint of its products throughout their long lifecycles.
16.	As integrated suites of HRM and FMS functions have been developed, organizations
have recognized the benefits of acquiring these solutions through products that permit the
integration of associated functions from a single vendor.
17.	Understandably, enterprise customers are generally unwilling to consider high function
enterprise software unless it has been successfully implemented by other similarly situated
customers (i.e., organizations of the same industry or governmental type with similarly complex
functional needs). An organization's ability to manage its human resource and financial
management information is fundamental to its ability to operate. In addition, these complex and
comprehensive solutions are typically more expensive to license and maintain and more difficult
to implement than other software products. Consequently, the availability of satisfied referral
customers is a prerequisite for many organizations to consider a vendor's software product.
18.	Organizations purchasing high-function enterprise software typically go through an
extensive procurement process by which they determine whether they need high-function
enterprise software to meet their needs and identify their preferred vendors. The procurement
process for enterprise customers can last from six to eighteen months and involves extensive
communications with the software vendors and often third-party consultants hired by the
19.	Enterprise customers normally initiate the procurement process by performing a detailed
assessment of their functional requirements, which are generally shared with potential suppliers. Based on the vendor responses and follow-up discussions, enterprise customers, often with the
assistance of consulting firms, identify those vendors that can potentially meet the enterprise
customer's needs and vendors with the capability to supply support, maintenance and upgrades
over the life of the product.
20.	To ensure that they obtain the product that most closely fits their needs, enterprise
customers provide the vendors with detailed descriptions of their functional requirements.
Enterprise customers meet frequently with vendors under consideration and share detailed
information regarding their requirements, the internal processes to be supported, the customer's
hardware and database platforms and other information relevant to the customer's needs. As the
procurement process proceeds, enterprise customers typically ask the vendors still under
consideration to demonstrate their software. The vendors must establish that their software can
be tailored to support the customer's specific business processes, primarily through configuration
options built into the software code. Vendors typically know which other firms they are
competing against, based on information developed during the lengthy procurement process. Often customers identify competing vendors and the prices that they are offering in an effort to
encourage price competition.
21.	Vendors compete against one another to offer a solution with the lowest total cost of
ownership. The total cost of ownership includes, among other things, the license fee,
maintenance fee, and cost of implementing the software. The identity of the competitors in each
sale and their relative ability to meet the prospective customer's functional needs are key factors
in the vendor's pricing decision.
22.	While using different proxies to describe customers that require high-function enterprise
software (such as volume of revenue and number of users), industry analysts recognize the
existence of this group and that the vendors who have the products and other characteristics to
satisfy this group are Oracle, PeopleSoft and SAP. For example, in 2002, when Charles Phillips,
currently the Co-President of Oracle, worked as an industry analyst for Morgan Stanley, he
issued a report that stated:
The back-office applications market for global companies is dominated by a monopoly
comprised of SAP, PeopleSoft, and Oracle. The market is down to three viable suppliers who
will help re-automate the back office business processes for global enterprises for years to come. PeopleSoft has made it into an elite club of critical enterprise software suppliers--those with
thousands of customers relying on the company for mission critical functions.
23.	The products affected by the proposed merger are:
(a)	Human Resource Management (HRM) software and accompanying services that can be integrated into suites of associated functions from a single vendor with performance characteristics that meet the demands of multifaceted organizations with high-level functional needs ("highfunction HRM software"); and
(b)	Financial Management Services (FMS) software and accompanying services that can be integrated into suites of associated functions from a single vendor with performance characteristics that meet the demands of multifaceted organizations with high-level functional needs ("high function FMS software").
24.	High function HRM and high function FMS software are lines of commerce and distinct
markets under Section 7 of the Clayton Act.
25.	Each enterprise customer that needs high function HRM software solutions and high
function FMS software solutions to satisfy its functional requirements has a unique end use for
these products. The purchase of the relevant products is conducted through a procurement
process that demonstrates that the software can be configured to meet the unique end use of the
individual customer. The price of the software is set based on the circumstances presented by
each transaction and vendors can price discriminate against individual customers. Other means
to support human resources and financial management functions are not sufficiently substitutable
for enterprise customers to discipline a small but significant increase in the price for high
function HRM and FMS software.
26.	Oracle, PeopleSoft and SAP sell HRM and FMS software throughout the United States
and the world. The United States is a relevant geographic market within the meaning of Section
7 of the Clayton Act.
27.	The markets for high function HRM and FMS software are highly concentrated and the proposed purchase of PeopleSoft by Oracle would substantially increase concentration. The
proposed purchase of PeopleSoft would reduce from three to two the number of firms that
compete in the development and sale of these products.
28.	The customers harmed by this transaction are enterprise customers, i.e. organizations
with functional requirements met only by high-function HRM and FMS software, that purchase
these products through a procurement process like that described above. Many customers that
will be harmed by this merger are identifiable by their reliance on the "Big 5" consulting firms in
selecting and often implementing the software they purchase.
29.	The possibility of losing the bid forces Oracle to offer customers a product that meets the
customers' functional requirements as closely as possible and at the lowest possible total cost of
ownership, subject to Oracle's cost of providing the product. Oracle and PeopleSoft constrain
one another's pricing and routinely compete to win customers by offering deep license and
maintenance discounts, striving to satisfy customers' unique requirements better than the other,
reducing customers' implementation costs, and making other business concessions. In addition,
both competitors track the products offered by the other and dedicate significant resources to
adding product enhancements to match and hopefully surpass each other's products.
30.	If this merger is permitted and PeopleSoft is eliminated as a competitor, Oracle's
incentive to offer deep license and maintenance discounts, to strive to best meet customers'
functional requirements, to reduce customers' total cost of ownership, and to make other
business concessions will be reduced. In the absence of continued competition from PeopleSoft,
Oracle's incentives to continue to innovate and upgrade its products in order to win additional
customers, and to maintain its current customers, will be substantially reduced.
31.	The elimination of one of only three vendors of high-function enterprise software will
likely result in higher prices. In addition, Oracle and PeopleSoft are the two best alternatives for
a significant number of customers that do not view SAP to be a viable substitute.
32.	Current customers of Oracle and PeopleSoft will also be harmed by the proposed
acquisition. Competition between Oracle and PeopleSoft has led to a high level of innovation
and upgrades to each company's products. Oracle will no longer have the incentive to innovate
in order to differentiate itself from PeopleSoft. Further, these customers benefit from
competition between Oracle and PeopleSoft when purchasing additional products and services. Consequently, enterprise customers within the current installed customer bases of Oracle and
PeopleSoft will likely suffer harm if the merger is permitted. The Plaintiff States' governmental
entities, general welfare, economies and citizens will be injured by reason of the resulting
33.	Entry or expansion will not be timely, likely, or sufficient to undo the competitive harm
that will likely result from the proposed merger.
34.	There are high barriers to entry or expansion into the markets for high function HRM
software and high function FMS software. The barriers include the high cost to research and
develop competing products, the time needed to develop these products and the need for a direct
sales and marketing force.
35. In addition, new entrants lacking high quality reference customers for their products
would find it difficult to persuade customers to incur the investment and risk associated with
acquiring an untested product to support the customers' most fundamental business processes
36.	Although Oracle asserts that the merger would produce substantial efficiencies, it cannot
demonstrate merger-specific and cognizable efficiencies that would be sufficient to offset the
merger's anticompetitive effects.
37.	The United States and the Plaintiff States hereby incorporate paragraphs 1 through 36.
38.	Pursuant to its public tender offer, Oracle plans to purchase PeopleSoft.
39.	The effect of the proposed acquisition of PeopleSoft by Oracle would be to lessen
competition substantially in interstate trade and commerce in violation of Section 7 of the
Clayton Act, 15 U.S.C. §18.
40.	The transaction would likely have the following effects, among others: competition in the development, provision, sale and support of high function HRM
software and high function FMS software in the relevant product and geographic markets
would be eliminated or substantially lessened;
actual and future competition between Oracle and PeopleSoft, and between these
companies and others, in the development, provision, sale and support of high function HRM
software and high function FMS software would be eliminated or substantially lessened;
prices for high function HRM software and high function FMS software would likely
increase to levels above those that would prevail absent the merger;
innovation and quality of high function HRM software and high function FMS
software would likely decrease to levels below those that would prevail absent the
merger, and;
quality of support for high function HRM software and high function FMS software
would likely decrease to levels below those that would prevail absent the merger.
1.	The proposed acquisition be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. §
2.	Oracle be permanently enjoined and restrained from carrying out the proposed acquisition,
or from entering into or carrying out any agreement, understanding, or plan by which Oracle
would merge with or acquire PeopleSoft, its capital stock or any of its assets or control the
PeopleSoft Board of Directors;
3. The United States and the Plaintiff States be awarded costs of this action and;
4.	The United States and the Plaintiff States have such other relief as the Court may deem
DATED: April 7, 2004 FOR PLAINTIFF UNITED STATES:
(Calif Bar No. 148425)
600 W. Street, NW Ste. 9500
(Calif Bar No. 89744)
Rm 10-0101, Box 36046
Chief, Antitrust and Civil Medicare Fraud Division
512 320-0975 (facsimile)
Rodney I. Kimura, Deputy Attorney General
Facsimile: (808) 586-1205
419 576-6470
410 576-7830 (telecopy)
410 576-6470
410 576 6470
445 Minnesota St., Ste. 1200
651 296-2921 (Voice)
651 296-1410 (FAX)
212 416-8282
ATTORNEY GENERAL State of North Dakota
tel 701 328-2811
fax 701 328-3535	RICHARD BLUMENTHAL
Department Head, Antitrust Div.
Hardford, CT 06106
Tel. (806) 808-5169
Special Litigating Division
Tel. (517) 373-1123
Fax (517) 373-9860
Tel. (614) 466-4328
Fax (614) 995-0266