A US judge has cast doubt on European Commission evidence in the contested Oracle-PeopleSoft merger, undermining an argument Brussels may want to use if it decides to block it.
US District Court Judge Vaughn Walker ruled last week that Oracle could go ahead with its $7.7-billion hostile take-over of its smaller software rival, rejecting Justice Department arguments that the deal was anti-competitive.
Walker heard many of the same arguments that the European Commission is weighing as it decides whether to reject the deal, including questions and answers to a European Union questionnaire that Brussels is keeping confidential on its side of the Atlantic.
The large world-wide consultancy BearingPoint said in answering the EU questionnaire that Oracle, PeopleSoft and the German company SAP form a market all of their own in special business software applications for large companies.
"Yes, there is such a market. The vendors are SAP, Oracle and PeopleSoft," BearingPoint said in its answer.
But Judge Walker wrote in his decision that the cross-examination of Perry Keating, a vice president of BearingPoint, undercut the written views he helped craft.
"Once the topic turned to the likelihood of entry into the marketplace by vendors other than SAP, Oracle or PeopleSoft, Keating's testimony began to undermine BearingPoint's response to the EC," Walker said in his 164-page decision.
As it turned out, BearingPoint is a consultant to Microsoft and Keating testified that "it was pretty clear they're (Microsoft) coming" into the market. The judge said he agreed with that view.
This matters because if there are more competitors in the marketplace then a merger would not unduly restrict competition to two big players, Oracle and SAP.
The Justice Department and the European Commission have both argued that no other players are coming into the market any time soon. If the Commission bars the deal and makes that argument, the cross-examination of Walker will cast doubt on that argument if the deal is appealed to the Court of First Instance.
"If I were the Commission I would certainly go back and say to Keating: 'Look what you said in the US proceedings. What is your answer now? Because we're trying to decide what to do,'" said a competition lawyer in Brussels, who asked not to be identified because his firm represents a party associated with the case in a different matter.
The lawyer said that if the Commission ruled against Oracle and Oracle then appealed to the European Union's Court of First Instance, "obviously, the Oracle lawyers are going to be citing the US opinion."