Merger Enforcement Irrationality

When the U.S. government yesterday sued to block Oracle's hostile takeover of PeopleSoft, only a few pundits got it right. Dan Gilmore of the San Jose Mercury News observed that the same "Justice Department officials who cut that sleazy Microsoft sellout, perhaps miffed that people continue to point out the Department's nonfeasance, are sticking it to one of their chief critics." And the venerable Wall Street Journal editorialized that Justice's merger theory -- that every large-scale enterprise customer represents its own market -- is ludicrous. "The Justice Department antitrust bureaucracy is sorely in need of some adult legal counsel," the Journal wrote.

Remarkably, Hew Pate, DOJ's chief antitruster, said the agency staff "did not consider the possibility of future competitors in making their decision." And he added a pointedly defensive critique that Oracle had "mischaracterized" the Department's legal theories "for public relations value."

This all sounds like sour grapes and result-oriented reasoning to me. The sad reality is that antitrust law used to be a principled field, bereft of political intrusions and populated by officials who prided themselves on a dispassionate, objective, analtytically rigorous approach to preserving competition. It certainly seems that may not be the case anymore.

[Disclaimer: I have represented Oracle over the years, including on antitrust matters, but have not been involved in the PeopleSoft acquisition.]

 Posted by glenn