[Federal Register Volume 61, Number 32 (Thursday, February 15, 1996)]
[Notices]
[Pages 6025-6032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3393]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Computer Associates International, Inc. and
Legent Corporation, Civ. No. 1:95CV01398 (TPJ) (D. D.C.); Response of
the United States to Public Comments Concerning the Proposed Final
Judgment
Pursuant to section 2(d) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. Sec. 16(d), the United States publishes below the
written comments received on the proposed Final Judgment in United
States v. Computer Associates International, Inc. and Legent
Corporation, Civil Action No. 1:95CV01398 (TPJ), United States District
Court for the District of Columbia, together with its response thereto.
Copies of the written comments and the response are available for
inspection and copying in Suite 200 of the Antitrust Division, United
States Department of Justice, 325 Seventh Street, N.W., Washington,
D.C. 20530 (telephone 202/514-2481) and for inspection at the Office of
the Clerk of the United States District Court for the District of
Columbia, Third Street & Constitution Avenue, NW., Washington, D.C.
20001.
Constance K. Robinson,
Director of Operations.
Response of the United States to Public Comments
Pursuant to the Antitrust Procedures and Penalties Act (``APPA'' or
``TUNNEY Act''), 15 U.S.C. Sec. 16(b)-(h), the United States is filing
this Response to public comments it has received relating to the
proposed Final Judgment in this civil antitrust proceeding. The United
States has carefully reviewed the public comments on the proposed Final
Judgment and continues to believe that entry of the proposed Final
Judgment will be in the public interest. After the comments and this
Response have been published in the Federal Register, under 15 U.S.C.
Sec. 16(d), the United States will move the Court to enter the proposed
Final Judgment.
This action began on July 28, 1995, when the United States filed a
Complaint charging that the acquisition of Legent Corporation
(``Legent'') by Computer Associates International, Inc. (``CA'') would
violate Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint
alleges that the acquisition would eliminate significant competition
between CA and Legent in five markets for systems management software
used with mainframe computers that work with the VSE operating system:
VSE tape management software; VSE disk management software; VSE
security software; VSE job scheduling software; and VSE automated
operations software. In addition, the Complaint alleges that the
transaction would substantially lessen competition in the market for
``cross-platform'' systems management software, used in computer
installations where a mainframe computer is linked together with other
types of computer ``platforms'' (such as midrange computers or networks
of workstations or personal computers).
Simultaneously with filing the Complaint, the United States filed a
[[Page 6026]]
proposed Final Judgment and a Stipulation signed by the defendants
consenting to the entry of the proposed Final Judgment, after
compliance with the requirements of the APPA.
Pursuant to the APPA, the United States filed a Competitive Impact
Statement (``CIS'') on August 18, 1995. The defendants filed a
Submission Pursuant to 15 U.S.C. Sec. 16(g) of the APPA, on August 11,
1995. A summary of the terms of the proposed Final Judgment and CIS,
and directions for the submission of written comments relating to the
proposal, were published in The Washington Post for 7 days from
September 3, 1995 through September 9, 1995. The proposed Final
Judgment and CIS were published in the Federal Register on September 8,
1995. 60 Fed. Reg. 46861-46870 (1995). The 60 day period for public
comments began on September 8, 1995 and expired on November 7, 1995.
The United States has received three comments, which are attached as
Exhibits 1-3.
I. Background
The proposed Final Judgment is the culmination of an intensive two-
month investigation of the proposed acquisition of Legent by CA. The
Government interviewed 55 customers and 14 competitors, who would have
been affected by the proposed acquisition in various product lines. In
addition, the Government issued 49 Civil Investigative Demands
(``CIDs'') and reviewed over 950 boxes of documents in connection with
this investigation.
At the conclusion of its investigation, the Government determined
that the proposed acquisition violated the Clayton Act. The Government
challenged the proposed acquisition and negotiated a proposed Final
Judgment with the defendants that adequately resolves its competitive
concerns.
II. The Legal Standard Governing the Court's Public Interest
Determination
When the United States proposes an antitrust consent decree, the
Tunney Act requires the Court to determine whether ``the entry of such
judgment is in the public interest.'' 15 U.S.C. Sec. 16(e) (1988). As
the D.C. Circuit explained, however, the purpose of a Tunney Act
proceeding ``is not to determine whether the resulting array of rights
and liabilities `is one that will best serve society,' but only to
confirm that the resulting settlement is `within the reaches of the
public interest.' '' U.S. v. Microsoft Corp., 56 F.3d 1448, 1460 (D.C.
Cir. 1995) (emphasis in original); accord, United States v. Western
Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert. denied, 114 S. Ct.
487 (1993); see also United States v. Bechtel, 648 F.2d 660, 666 (9th
Cir.), cert. denied, 454 U.S. 1083 (1981); United States v. Gillette
Co., 406 F. Supp. 713, 716 (D. Mass 1975).\1\ Hence, a court should not
reject a decree ``unless `it has exceptional confidence that adverse
antitrust consequences will result--perhaps akin to the confidence that
would justify a court in overturning the predictive judgments of an
administrative agency.' '' Microsoft, 56 F.3d at 1460 (quoting Western
Elec., 993 F.3d at 1577).
\1\ The Western Elec. decision involved a consensual
modification of an antitrust decree. The Court of Appeals assumed
that the Tunney Act standards were applicable in that context.
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Tunney Act review is confined to the terms of the proposed decree
and their adequacy as remedies for the violations alleged in the
Complaint. Microsoft, 56 F.3d at 1459. The Tunney Act does not
contemplate evaluating the wisdom or adequacy of the Government
Complaint or considering what relief might be appropriate for
violations that the United States has not alleged. Id. Nor does it
contemplate inquiring into the Government's exercise of prosecutorial
discretion in deciding whether to make certain allegations. To the
extent that comments raise issues not charged in the Complaint, those
comments are irrelevant to the court's review. Id. at 1460. The Court's
inquiry here is whether the relief sought in the markets of concern in
the Complaint has been tailored to maintain the level of competition
that existed in those markets prior to the acquisition.
It is not the function of the Tunney proceeding ``to make [a] de
novo determination of facts and issues'' but rather ``to determine
whether the Government's explanations were reasonable under the
circumstances'' for ``[t]he balancing of competing social and political
interests affected by a proposed antitrust decree must be left, in the
first instance, to the discretion of the Attorney General.'' Western
Elec., 993 F.2d at 1577 (internal quotations omitted). Courts have
consistently refused to consider ``contentions going to the merits of
the underlying claims and defenses.'' Bechtel, 648 F.2d at 666.
In addition, no third party has a right to demand that the
Government's proposed decree be rejected or modified simply because a
different decree would better serve its private interests. For, as this
Circuit has emphasized, unless the ``decree will result in positive
injury to third parties,'' a district court ``should not reject an
otherwise adequate remedy simply because a third party claims it could
be better served.'' Microsoft, 56 F.3d at 1461 n.9.\2\ The United
States--not a third party--represents the public interest in Government
antitrust cases. See e.g., Bechtel, 648 F.2d at 660, 666; United States
v. Associated Milk Products, 534 F.2d 113, 117 (8th Cir.), cert.
denied, 429 U.S. 940 (1976).
\2\ Cf. United States v. Associated Milk Producers, Inc., 534
F.2d 113, 116 n.3 (8th Cir.), cert. denied, 429 U.S. 940 (1976)
(``The cases unanimously hold that a private litigant's desire for
[the] prima facie effect [of a litigated government judgment] is not
an interest entitling a private litigant to intervene in a
government antitrust case.'').
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III. Entry of the Proposed Final Judgment is in the Public Interest
Entry of the proposed Final Judgment in this case is clearly within
the reaches of the public interest under the standards articulated in
Microsoft and other decided cases. The proposed Final Judgment resolves
the competitive concerns that led to the filing of this case as to each
of the five VSE systems management product markets and the cross-
platform systems management software market identified in the
Complaint.
IV. Response to Public Comments
We received only three comments, one from a customer, one from a
competitor, and one from a former Legent employee.
A. Comment of Pete Clark (Exhibit 1)
Pete Clark, a VSE customer, submitted a comment expressing concerns
as to: (1) Whether certain Legent products apart from the five named in
the proposed Final Judgment (the ``Subject Software Products,'' as
defined in paragraph II.H. of the proposed Final Judgment, hereafter
referred to as the ``subject products'') should also be included within
the scope of relief; (2) the adequacy of CA licensing, rather than
completely divesting, the subject products as an effective remedy to
the competitive harm posed by CA's acquisition of Legent; and (3) the
adequacy of provisions of the proposed Final Judgment aimed at helping
a licensee recruit and hire former Legent personnel responsible for
development of the subject products.
1. Product Coverage
Mr. Clark believes that six additional Legent products should also
be covered by the proposed Final Judgment because of their close
relationship in functionality to two of the subject products--FAQS/PCS,
for VSE automated job scheduling, and FAQS/ASO, for VSE automated
operations. Mr. Clark appears not to regard the six
[[Page 6027]]
additional products as constituting markets of competitive concern
apart from the markets alleged in the Complaint and addressed in the
proposed Final Judgment, in which case, his criticism would not be
cognizable. Microsoft, 56 F.3d at 1459. Rather, he asserts that being
able to market the six products is important to the competitive
viability of the eventual licensee of FAQS/PCS and FAQS/ASO in the
markets for job scheduling software and automated operations software
respectively.
In defining relevant markets and evaluating competitive
capabilities of firms in the markets, the Government considered the
possible effects of CA's acquisition of Legent with reference to many
products and combinations of products marketed by either of the
parties, including Mr. Clark's six candidates for coverage by the
proposed Final Judgment. Our investigation did not, however, support
Mr. Clark's view that a vendor's success or effectiveness in marketing
FAQS/PCS or FAQS/ASO depends on its ability also to market any of the
six additional products.
To whatever extent that it might be useful for users of FAQS/PCS or
FAQS/ASO to also have access to any of Mr. Clark's six products, those
products are likely to continue to be available in the marketplace.
Having acquired Legent, CA now supplies the six products as well as
FAQS/PCS and FAQS/ASO. If Mr. Clark is correct about the existence of
valuable functional inter-relationships among these products, CA should
have the same incentives to continue marketing all of them as Legent
had before CA's acquisition of it, and customers will have the same
access to them.
In addition, a licensee of CA under the proposed Final Judgment
may, to the extent it deems necessary, seek licenses from CA as to any
of the six products. Where appropriate, such additional licenses may be
facilitated by application of paragraph II.H.2. of the proposed Final
Judgment, which defines ``subject software product'' to include ``all
optional modules, add-ons, enhancements and software customization sold
or distributed to customers for use with the Subject Software
Product.''
The overriding objective of the proposed Final Judgment is to
ensure that the contemplated licenses will result in the establishment
of a viable and effective new competitor in the markets where
competition would otherwise be reduced substantially by CA's
acquisition of Legent. Pursuant to paragraphs IV.A.8. and IV.C.2. of
the proposed Final Judgment, the Government has the responsibility to
determine, in its sole discretion, whether this objective is satisfied.
The Government will be monitoring the license negotiation process and
the scope of the proposed licenses carefully in exercising this
responsibility. Moreover, the proposed Final Judgment, at paragraph
IV.C.6., gives the Government the right to seek additional relief
should a Court-appointed trustee's efforts to license the subject
products fail to produce, to the satisfaction of the Government, an
effective new competitor in any of the relevant markets. The Court is
then authorized to enter additional orders ``as it shall deem
appropriate in order to carry out the purpose of the trust * * *.'' Id.
2. Adequacy of Licensing Remedy
Mr. Clark's general assertion that complete and total divestiture
is the only means of effectively addressing the competitive concerns
posed by CA's acquisition of Legent is unfounded. While Mr. Clark notes
specific issues pertinent to the fashioning of appropriate relief in
this case, all of his points had been fully anticipated and considered
by the Government, and all have been addressed in the proposed Final
Judgment with measures aimed at ensuring the establishment of an
effective competitor for each of the subject products.
For example, Mr. Clark correctly points out the importance of
ensuring that any new marketer of the subject products acquires not
merely the right to sell the product but also capabilities to provide
competitive levels of customer support and to engage in sufficient
levels of product research and development necessary for long-term
competitive viability. With respect to these points, various provisions
of the proposed Final Judgment require CA to provide a licensee with
all the software codes, specifications, development tools, and other
information or know-how needed to compete effectively in terms of
product support and development. Paragraph II.H. of the proposed Final
Judgment. In addition, the proposed Final Judgment provides the
licensee with the opportunity and assistance of CA to recruit and hire
former Legent product development and technical support personnel
retained by CA after acquiring Legent. Paragraph IV. B. 4-5. of the
proposed Final Judgment.
In any event, as noted above, paragraph VI.C.6 of the proposed
Final Judgment permits the Government to seek additional relief
consistent with the purpose of the proposed Final Judgment, if that
proves to be necessary. In such case, the Court is authorized to enter
additional orders as appropriate, ``which shall, if necessary, include
disposing of any or all assets of the Subject Software Product
businesses, including Customer contracts and/or software assets * *
*.'' Id.
3. Access to Developers
Mr. Clark raised concerns that provisions of the proposed Final
Judgment requiring CA to assist licensee recruitment of former Legent
personnel are overly restrictive in applying only to individuals whose
job duties related to development or technical support of the subject
products as of the date on which the proposed Final Judgment was filed.
Mr. Clark suggested that prior to filing of the proposed Final Judgment
many Legent employees with relevant product development expertise were
transferred to other assignments to avoid subjecting them to the
provisions of the proposed Final Judgment governing licensee
recruitment.
The proposed Final Judgment, at paragraph VI, prohibits CA from
taking any action that would thwart the disposition of the Subject
Software Products or undermine the Judgment's objectives. Thus, the
proposed Final Judgment already addresses Mr. Clark's concern.
In any event, the Government investigated Mr. Clark's concerns,
particularly in light of his suggestion that the parties may have
engaged in conduct to frustrate a significant term of the proposed
Final Judgment. Our investigation did not, however, substantiate Mr.
Clark's concerns, and we are presently satisfied that expanding the
scope of CA's obligations to assist in licensee recruitment efforts is
not necessary. Moreover, nothing prevents any former Legent employees
interested in working for a licensee--including employees not covered
by the Judgment's recruitment terms--from seeking out the licensee and
pursuing employment discussions without CA's assistance.
B. Comment of Syncsort, Inc. (Exhibit 2)
Syncsort, Inc. (``Syncsort'') submitted a comment expressing
concerns that the proposed Final Judgment does not address a VSE
systems management software product known as sort software, which is
commonly used in connection with two of the subject products, disk and
tape management software. Syncsort markets a sort software product that
it sells in competition with a CA product. Legent does not have a sort
software product, so CA's acquisition of Legent does not reduce current
competitive choices for VSE sort products. However, Legent has
[[Page 6028]]
in the past cooperated with Syncsort by providing it with software
interface information to help Syncsort develop a sort product that
works well with Legent's disk and tape management products.
Syncsort believes that Legent's new owner, CA, being a competitor
in sort software, will not have the incentives that Legent once had to
cooperate with Syncsort; instead, CA may have incentives to try to
disadvantage Syncsort by withholding information on future Legent
interface developments and by making new versions of Legent's disk and
tape management products increasingly less compatible with Syncsort's
sort product. To address these concerns, Syncsort suggests that the
proposed Final Judgment be modified to require CA and its licensee to
maintain the levels of cooperation and interface information sharing
that previously existed between Syncsort and Legent.
The issues raised by Syncsort are adequately addressed by the
proposed Final Judgment. As noted before, the central purpose of the
proposed Final Judgment is to enable another firm to step in Legent's
place as a viable and effective competitor in the markets for the
subject products. The accomplishment of this objective should alleviate
Syncsort's concerns by establishing and maintaining an independent
developer and marketer of tape and disk management software with which
Syncsort could work to develop compatible sort software. There is
little reason to suppose that Legent's competitive replacement would
have any less incentives to cooperate with Syncsort on software
interfaces than Legent had. To the extent that this interface
cooperation confers significant marketplace advantages to the new
supplier of the subject products, competitive pressures may compel CA
itself to engage in such cooperation.
C. Comment of Brian W. Gore (Exhibit 3)
Brian W. Gore, a former employee of Legent, stated concerns similar
to those of Pete Clark relating to the scope of the products that are
the subject of the proposed Final Judgment. Although Mr. Gore
identified different additional products for coverage than those named
by Mr. Clark, his reasons in support of adding the products are similar
to the views expressed by Mr. Clark. For the reasons previously stated
in response to Mr. Clark's comments, the Government does not believe it
appropriate or necessary to provide relief focusing on any of the
products identified by Mr. Gore.
Mr. Gore also raised concerns similar to Mr. Clark's comments with
respect to the primary requirement of the proposed Final Judgment that
CA license with subject products rather than completely divest them.
Again, the Government's previously stated response to Mr. Clark's
comments is equally responsive to Mr. Gore's.
Lastly, Mr. Gore indicated that the proposed Final Judgment does
not contain sufficient provision for actions against CA for violations
of the proposed Final Judgment. Here, Mr. Gore's concerns appear
largely to be based upon CA's terminations, previously brought to the
Government's attention, of several former Legent employees associated
with the subject products. The Government has thoroughly investigated
these terminations and has concluded that they did not pose violations
of any provisions of the proposed Final Judgment.
V. Conclusion
The Court should enter the proposed Final Judgment upon the
Government's compliance with the APPA. The issue in this proceeding is
whether the settlement is ``within the reaches of the public
interest.'' Microsoft, 56 F.2d at 1460. Because the proposed decree is
within the scope of the public interest, the Court should enter it
after the Government's responses to the public comments are published
in the Federal Register and the Government certifies compliance with
the APPA and moves for entry of judgment.
Dated: February 1, 1996.
Respectfully submitted,
John F. Greaney, Weeun Wang, Minaksi Bhatt,
Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th
Street, N.W., Room 9901, Washington, D.C. 20001, Tel: 202/307-6200,
Fax: 202/616-8544.
From: Pete Clark, Technical Support Manager, Olan Mills, Inc., P.O.
Box 23456, Chattanooga, TN 37422
To: Judge Thomas Penfield Jackson, United States District Court for
the District of Columbia, Washington, DC 20549
Weeum Wang, United States Department of Justice, Washington, DC
20549
Paku Kahn, Tennessee State Attorney General's Office, Nashville, TN
Christine Rosso, Illinois State Attorney General's Office, Chicago,
IL 60601
Subject: Case # 1:95CV01398--Computer Associates/Legent Acquisition
The information following is a result of having read the
Department of Justice Complaint, of having been gainfully employed
in the VSE systems software arena for the last 30+ years, of having
been a customer of both Legent and Computer Associates, and of
having been immediately involved with this industry, its vendors,
and its customers since the industry began.
Introduction
While it is somewhat presumptuous of myself to lay claim to
being an expert in the field of VSE system software. It is perhaps
more accurate to indicate that many users, many vendors (including
Computer Associates and Legent) and many trade press persons have
certainly labeled myself as ``the expert in the VSE systems software
arena''.
I certainly have spent the last 30+ years in efforts to become
proficient in the VSE systems software. In my 30+ years of
employment, I have been involved in almost every position in a VSE
data center. Operations, programming, system programming, education,
systems design, system analysis and management are just a few of the
areas. In addition to the preceding areas, I have taught various
VSE-related college level courses, written many articles that have
been published in national and international periodicals, have
conducted many seminars for VSE user groups and VSE software vendors
around the world and have done numerous private software/hardware
consultations for both VSE vendors and users I have throughout the
years written several modifications to the VSE operating system and/
or vendor products that received wide spread adoption among users
and these modifications have historically been incorporated into the
facilities they were written for by the respective vendors.
The purpose of the preceding paragraph is simply to convince the
court that I have sufficient knowledge of the VSE systems area to
make valid, accurate observations that have merit.
I have several concerns with the Department of Justice Final
Judgment, Civil Action Number 95 1398. These concerns all relate to
maintaining a healthy competitive VSE system software market.
Product Issues
The DOJ Final Judgment specifically addresses five products. My
concern is that there are several other products, that inter-relate
closely with the five products, that are not addressed. These
products are FAQS/CALL, PREVAIL/PCS, PREVAIL/XPE, EXPLORE/VSE,
EXPLORE/CICS and EXPLORE/VTAM. These six products are closely
associated with one or more of the five products that are to be
available for licensing.
Excluding these six products from the licensing agreement
significantly devalues the original five products value to a vendor
and to the ultimate customer. Not including these six products in
the licensing program seriously impacts the probability of creating
a successful competitive arena. There are defined interfaces and
functional relationships between the five licensable products and
the six excluded products that are critical to attracting and
maintaining customers.
Separate licensing of the five products without some or all of
the other six products results in a significant function loss for
many of the customers. This loss of function
[[Page 6029]]
dramatically affects the competitiveness of the VSE systems software
market, requiring customers to remain with Computer Associates to
prevent function loss, even if they prefer another product licensee.
To explain: FAQS/ASO and FAQS/PCS are closely allied with
PREVAIL/PCS, FAQS/CALL, and PREVAIL/XPE Manager. WHY? Because all
revolve closely around operator console automation and job
scheduling. Having access to only FAQS/ASO and FAQS/PCS via the
licensed vendor means I cannot institute cross platform scheduling.
I cannot automatically notify persons of problems via computer and
telephone interfaces of issues or problems. I cannot manage my
complete multiple platform systems from a single control station. I
basically have a very one dimensional automation and scheduling
capability. THIS IS NOT ACCEPTABLE IN TODAY'S BUSINESS ENVIRONMENT.
The functions discussed with automation and scheduling are critical
to my business capability and strategy and to many other VSE
customers.
The FAQS/ASO and FAQS/PCS relationship with the EXPLORE group of
products (VSE/VTAM/CICS) are somewhat less dramatic but are
definitely important. With the integrated EXPLORE products I can
gather performance information and monitor critical performance
thresholds and take action automatically via FAQS/PCS and FAQS/ASO
to limit degradation, improve performance and thruput, and enable
automatic notification of problem areas. Again a significant set of
functions that would not be available without a consistent set of
product interfaces, typically via a single vendor.
If licensing is appropriate for the 5 products identified in the
Judgment then it is also especially appropriate for PREVAIL/XPE,
PREVAIL/PCS and FAQS/CALL and definitely warrants serious
consideration for EXPLORE/VSE, EXPLORE/CICS and EXPLORE/VTAM. The
eleven products complete a cohesive functional product suite that
can be truly competitive with Computer Associates existing product
suite.
Having five products from the licensee and the other six
products from Computer Associates presents a daunting challenge. I
have personally had experience in this environment before, trying to
interface Computer Associates products closely with other vendor
products. Because of co-operation issues product problems and
interface errors, after 2 years we closed that project and committed
to not ever utilize that approach again. It simply is not a workable
alternative.
We currently hold permanent licenses for four of the five
licensed products and all six of the additional products mentioned
in this document and in addition six other Legent products that were
purchased by Computer Associates that are not discussed in this
document.
Product Licensing
Is licensing an acceptable way to ensure competitiveness in this
market place?
NO. I do not think so. This is system software, a significant
competitive part of system software is ingenuity, unique solutions,
complementary product interactions, proprietary system interfaces,
product support, product enhancements, developer capability, and a
close vendor/customer working relationship.
Most of these issues are not adequately addressed with this
Judgment and all are very critical to maintaining a competitive
environment. This Judgment does not address these issues in a manner
that ensures and maintains a competitive market place.
This Judgment segregates and separates products preventing
complementary product integration and negatively affecting
competition and customer ability to effectively build a product
suite that utilizes cross product synergy to maximize capabilities.
By instituting licensing rather than divestiture Computer
Associates is the benefactor of having complete and total access to
both their existing product line and complete and total access to
all of Legents product line. A significant advantage Legent had over
Computer Associates in the market place was incorporated into the
software it had developed.
The licensee only has access to the licensed products and is
definitely placed into the market at a distinct disadvantage. As if
startup was not already enough of a challenge the licensee must deal
with a competitor with ``inside product knowledge''. This scenario
ensures that the licensee is NOT competing on equal footing within
the market place.
Complete and total divestiture is the only way to ensure a truly
competitive market
Access to Developers
While the Judgment makes provisions for the licensee to be able
to potentially obtain developers with knowledge of the product set,
it severely restricts who the licensee may considered. Perhaps it
was not known that many of the developers, who had expertise in the
area, were ``transferred'' to other assignments prior to this
Judgment. This had the effect of making them ineligible for
consideration by the licensee and severely limits the talent pool.
Almost without exception the original developer was not associated
with the licensed product on the day of Judgment signing.
This part of the Judgment must be modified to include persons
involved with the product in any substantial way within one year
prior to the initial Legent/Computer Associates acquisition
agreement.
Conclusion
Three modifications must be made to the original Judgment to
make it a viable competitive environment:
1. Add the following products PREVAIL/XPE, PREVAIL/PCS, FAQS/
CALL, EXPLORE/VSE, EXPLORE/CICS and EXPLORE/VTAM into the Judgment.
2. Alter the Judgment to require divestiture instead of
licensing of all 11 products.
3. Alter access to personnel to include anyone who has performed
substantive work on any of the products in the past year, dating from
5/25/95.
Many VSE customers including myself believe that without these
three modifications the Judgment has very little if any chance of
being successful. Who will be impacted if these three issues are not
addressed? Every Legent customer.
State's Attorney Generals
I respectively request that the State's Attorney General's of
states with customers affected by this Judgment intervene to ensure
that a fair, competitive market in VSE system software products is
maintained and that active harm is not done to customers information
systems installations by allowing this acquisition to proceed.
Thanks
Pete Clark,
Technical Support Manager, Olan Mills, Inc.
November 6, 1995.
VIA FEDERAL EXPRESS
John F. Greaney, Esq., Chief, Computers & Finance Section, Antitrust
Division, United States Department of Justice, Suite 9901, 555 4th
Street, N.W., Washington, D.C. 20001
Re: United States v. Computer Associates International, Inc. and
Legent Corporation (95 CV 1398) (United States District Court for
the District of Columbia)
Dear Mr. Greaney: On behalf of our client, Syncsort, Inc.
(``Syncsort'') we submit these comments to bring to your attention
certain facts about competition in the market for VSE sort software
and the impact of the proposed consent decree on that market which
we believe require a minor, but nonetheless important, modification
to the Final Judgment.
Syncsort is a company which, among other things, specializes in
developing sophisticated, high performance sort software for main-
frame computer environments, including the VSE system environment
which is the subject of the proposed decree. A summary of the
technical specifications of Syncsort's current VSE sort product,
SyncSort VSE Release 2.3, is enclosed as Attachment A. Sorting
software permits efficient operation of main-frame computers,
effectively speeding their operation and increasing their practical
capacity through use of sort algorithms in virtual memory.
Competition in price and improvement of sorts benefits VSE computer
users by reducing computer time and enabling them to use their
computer resources with maximum efficiency, reducing overall
computer costs.
Syncsort's sort product must interface with the systems
management software which is the subject of the proposed decree, and
particularly the disk/tape manager programs. In the VSE environment,
this has meant attempting to interface either with the Dynam/D and
Dynamt/T program of defendant Computer Associates International,
Inc. (``CA'') or the EPIC/VSE program of defendant Legent
Corporation (``Legent'').
CA markets its own sort product which competes with Syncsort's
and therefore has an incentive not to cooperate with Syncsort. In
fact, CA's systems management software is structured so that
Syncsort's product does not have ``PreOpen'' access to file
[[Page 6030]]
information although CA's own sort product does have such access.
Legent, on the other hand, does not offer its own sort product, and
Legent has historically cooperated with Syncsort, permitting the
sort to access crucial information through EPIC/VSE before
a file is open.
Without the modification Syncsort proposes, there is a danger
that the acquisition will disadvantage Syncsort--and ultimately VSE
users--despite the best intentions of the proposed Final Judgment.
Under the proposed Judgment, those VSE users who continue using the
Legent products will now be divided among two companies (CA and the
licensee). One of these companies has a history of not affording
competitive third party sort products PreOpen access to file
information through its disk and tape management software; the other
company has no history either way but faces uncertain prospects for
a long-term role in the market. As a step toward maintaining the
status quo, the decree should provide that the EPIC/VSE
PreOpen interface or its equivalent will be maintained--by both CA
and the licensee--for all Legent/VSE products or VSE products
subsequently derived from the Legent products.
Even with this relief, the competitive equation will change
after the acquisition takes place. Another small step is therefore
in order. Since current Legent users can choose to become CA users
(and since some at least will conclude that this is the least risky
choice), CA is likely to have even more users of its software
management programs than in the past. CA will therefore have more
market power and more opportunity than in the past to engage in
strategic behavior to extend that market power into the sort product
market. To deal with this change in market conditions, the decree
should provide explicitly that neither CA nor the licensee will
discriminate among other sort programs (including their own sort
programs) in the interface and interface information made available
for the sort function.
These are relatively minor modifications to the Final Judgment,
entailing no real costs or burdens on the parties. They are
nevertheless of considerable importance for the future. They serve
much the same purpose as, and are even lesser mandatory in nature
than, the provision in the decree requiring CA to assure competitors
potential access to PIPES for cross-platform customers. (Final
Judgment para. VII.) Suggested language to accomplish these purposes
is set forth on the enclosed attachment B.
The need for provisions such as these is well illustrated by
past history. Legent has cooperated with Syncsort in the development
of EPIC/VSE so that file information is exchanged before a
file to be sorted is opened. The information provided includes the
following nine items:
1. file size
2. tape/disk
3. device type
4. blocksize/CIsize
5. concatenated
6. record length
7. record format
8. file type
9. spanned
The PreOpen availability afforded by EPIC/VSE permits
dynamic device switching by the customer--switching between devices
without the computer user having to change programs or its job
control language (``JCL''). PreOpen availability also permits
dynamic reblocking--changing from one blocksize to another without
the computer user having to change programs or JCL. Finally, the
PreOpen interface improves performance of the sort by allowing the
optimal sorting algorithms to be chosen before the file is open. In
short, the current, PreOpen EPIC/VSE interface permits
Syncsort to design, and VSE customers to use, efficient, state of
the art sorts without sacrificing flexibility; reduces the amount of
computer time needed for a particular operation; and provides a high
performance sort option for main frame users in the VSE environment.
Syncsort's history with CA, which markets its own program in
competition with Syncsort's, has been quite different. CA has
arbitrarily refused to provide PreOpen access to Syncsort of the
type afforded by EPIC/VSE--but nevertheless has provided
such access to its own sort product. File information can now be
obtained by Syncsort's program only much later, after the file is
actually opened. This denial of access means that, for many users,
Syncsort is unable to provide dynamic device switching or dynamic
reblocking, providing less flexibility and degrading the sort's
potential utility for the customer. Moreover, without PreOpen
information about file size, record length and the like, the
Syncsort sort may be precluded from choosing the optimal sort
algorithms.
There is no technological, cost or other acceptable reason for
this difference in access. It has been explained to Syncsort as
dictated entirely by CA's perceived competitive advantage. After the
divestiture CA's ability to exploit this unfair competitive
advantage is likely to be greater, not less, than it is today.
According to the complaint, CA already has 96% of the market for one
of the software management products (disk management, para. 19) with
which the sort must interface; if even as few as one quarter of the
Legent customers switch, CA will control nearly 60% of the other
(tape management para. 18). There is no guarantee, absent the
suggested decree modification, that CA will maintain PreOpen
Access--or any access at all--for third party sorts for any of these
users. If, ultimately, the licensee should fail or be unable to
compete effectively with CA, CA could abandon or change the former
Legent products and Syncsort and VSE sort users would have no
protection at all.*
*Syncsort believes the 25% figure for switching customers is
low; if one half the Legent customers switch, CA would have market
shares of approximately 95% and well over 70% and virtually no
market constraints on its behavior.
---------------------------------------------------------------------------
These circumstances mandate that the Judgment be modified so
that whoever inherits a former Legent customer--the licensee or CA--
will continue to maintain PreOpen access in EPIC/VSE. In
addition, protection is required against the type of discrimination
CA has employed in the past to favor its own sort product so that CA
cannot anticompetitively translate any market power gained through
the acquisition into a forclosure of the competition and VSE choices
that now exist in the sort market.
Support for such terms can be found in the proposed Final
Judgment in United States v. AT&T and McCaw Cellular Communications,
Inc., 59 F.R. 44158, August 26, 1994. There, the Department of
Justice recognized that, after its merger with McCaw, AT&T would
possess both the incentive and the ability to discriminate against
additional third parties. 59 F.R. at 44168. As a means of requiring
AT&T ``to continue to deal with its customers on terms in place
prior to the merger [with McCaw], and on terms not less favorable
than those offered to McCaw,'' (59 FR at 44158), that decree
proposes requiring AT&T to provide on-going support for ``locked-
in'' customers and to arrange an alternative source of supply for
certain products if they are discontinued by AT&T. 59 FR at 44164.
Similarly, the Final Judgment here should be modified to require (i)
that CA and the licensee maintain the EPIC/VSE PreOpen
interface, or its equivalent, and (ii) that neither CA, nor the
licensee, will discriminate among other sort programs in the
interface and interface information made available for the sort
function.
Respectfully submitted,
James B. Kobak, Jr.
cc: Richard Rosen, Esq., Arnold & Porter, 555 12th Street N.W.,
Washington, D.C. 20004
Michael Byowitz, Esq., Wachtell, Lipton, Rosen & Katz, 51 W. 52nd
Street, New York, NY 10019
Attachment A
SyncSort VSE
Technical specifications
Release 2.3
Introduction
SyncSort VSE is a high performance sort/merge/copy utility
designed for IBM VS, VSE, VSE/SP, and VSE/ESA operating systems.
SyncSort provides significant savings in program and supervisor CPU
time, elapsed time, and I/O activity.
Performance
In benchmark tests of SyncSort VSE Release 2.3 against SM2
Release 5, SyncSort reduced total CPU time by 25-30%, elapsed time
by 25-30%, and SIOs by 30-40%.
SyncSort achieves superior performance through optimization for
specific computer make and model, proprietary sorting algorithms,
advanced access methods, and Data Space utilization. SyncSort
dynamically responds to system activity such as real and virtual
storage availability, and paging rates to ensure optimum
performance.
In a VSE/ESA environment, SyncSort VSE exploits Data Space
technology with two unique features,``virtual library'' and
``virtual sortwork''. These capabilities maximize the use of high
speed virtual memory, minimizing resource consumption and reducing
elapsed time.
SyncSort VSE's Dynamic Storage Manager ensures that all sorts
attain optimum
[[Page 6031]]
performance by intelligently managing a Data Space so that numberous
concurrent sorts can exploit virtual sortwork.
Sort/Merge/Copy Processing
EBCDIC or user-defined collating sequences.
Up to 64 control fields, with length up to 4092 bytes.
Fields in fixed length records may be located anywhere in the
record.
All standard field formats, including character,
binary, packed decimal, zoned decimal, fixed point, floating point,
and various signed formats.
High performance MERGE combines up to 9 pre-
presequenced data sets into one output dataset sequenced identically
to the input datasets.
High performance copy function (SORT FIELDS=COPY) can
be used alone or with data editing.
Input/Output
SyncSort supports:
SAM, VSAM, and VSAM-managed SAM formats and devices,
including devices connected via the ESCON architecture.
Fixed-length and variable-length records.
Processing of variable-length records shorter than
control field.
Intermediate Files
Disk.
Automatic secondary sortwork allocation with up to 31
extents.
Automatic space release for DASD output files via disk
space manager.
Resource Management Features
Dynamic Storage Manager. Automatically monitors and
controls memory utilization, and reduces or eliminates physical
sortwork I/O for concurrent sorts. Optimizes the use of a Data Space
by allowing up to 15 concurrent sorts running in different
partitions to use the virtual sortwork area. Maximizes sort
performance while optimizing overall system throughput.
Disk Space Manager Interface. Minimizes DASD resources
used for sorting while preventing ``sortwork capacity exceeded''
abends. Compatible with all disk space managers.
Attachment B
Computer Associates and any licensee or successor in interest to
Legent's interest in the Subject Software Programs (``Legent's
Successor'') shall each maintain and provide, from and after the
effective date of this Final Judgment, at least the same degree of
PreOpen Access to file information through EPIC/VSE (including
without limitation any successor to or substitute for EPIC/VSE, any
upgraded or modified version of EPIC/VSE or any program derived from
the EPIC/VSE program) as that made available to sort programs
through Legent's EPIC/VSE program prior to the acquisition of Legent
by Computer Associates. In addition, and without limiting Computer
Associate's or Legent's Successor's obligations with respect to the
foregoing sentence, neither Computer Associates nor Legent's
Successor shall, from and after the effective date of this Decree,
discriminate among sort programs, including any sort program of its
own, concerning (i) the timing and manner of access to any disk or
tape manager or similar program made available to VSE customers and
(ii) provision of relevent information.
November 7, 1995
U.S. Department of Justice, Antitrust Division, 555 4th Street,
N.W., Room 9903 JCB, Washington, D.C. 20001
Re: Civil Action No. 95 1398; U.S.A. v. Computer Associates, Int'l.
and Legent Corp.
Gentlemen: This a comment concerning the Proposed Final
Judgement for the aforementioned case. As a 20-year veteran of (IBM
mainframe computer) VSE operating system software operations and
support, I find the Proposed Final Judgement to be deficient in the
following four areas:
1. No provisions for other Legent VSE products also using G.S.S.
common code.
Explanation: G.S.S. is a proprietary integrated on-line
transaction processor subsystem used by all (or at least most)
Legent VSE products that contain an on-line component. While some of
those products such as FAQS/ASO, FAQS/PCS and EPIC/VSE are covered
by the Proposed Final Judgement, others such as Mastercat, SAR-
Express/Delivery, FLEE, etc.) are not. This poses a serious dilemma
for any Legent customers running VSE products in both of the
aforementioned categories.
Because while it has already been ascertained from discussions
with D.O.J. lawyers assigned to this case that the G.S.S. code would
be included with any license agreement, there is no requirement that
Computer Associates and the licensee keep their respective copies of
G.S.S. compatible once a licensee has been assigned. Indeed, such a
requirement would not be practical, and at some point (most likely
soon) in the future, the Computer Associates and the licensee's
versions of G.S.S. would become incompatible, requiring any customer
running G.S.S.-based VSE products from both companies to run
separate copies of G.S.S.
This type of arrangement would not be acceptable to most
customers since it needlessly complicates installation, maintenance
and usage of the VSE products, reduces integration and is fraught
with operational problems since G.S.S. was never designed to be used
in such a fashion. Thus all customers with G.S.S.-based VSE products
that are not covered by the Proposed Final Judgement and remain only
available from Computer Associates would be forced to get their
G.S.S.-based VSE products that are covered by the Proposed Final
Judgement from Computer Associates as well to avoid the
complications of incompatible versions of G.S.S. This situation ends
up creating a ``restraint of competition'' condition that would
promulgate the Computer Associates monopoly in VSE products that the
Proposed Final Judgement was originally designed to prevent (or at
least reduce).
(I estimate this situation involves a substantial portion of the VSE
product customer base, possibly even a majority.)
2. No provisions for other Legent VSE products also using the
EPIC DSN catalog.
Explanation: The EPIC DSN catalog is a proprietary database file
used by EPIC-based products on various mainframe platforms to
accomplish disk and tape file management across those platforms. In
this case, while the EPIC/VSE product is covered by the Proposed
Final Judgement, other EPIC-base products, namely EPIC/CMS for the
VM operating system, is not. This poses a serious dilemma for any
Legent customers running EPIC-based products in both aforementioned
categories, (or in this case, platforms).
The arguments for this point are essentially the same as those
outlined in #1 above; however, this case concerns a database file
shared across operating system platforms (VSE and VM) instead of a
subsystem shared within the same operating system (VSE). The end
result however, is the same: restraint of competition. Since there
is no provision in the Proposed Final Judgement to keep the database
file shared by these 2 products compatible nor any mention of the
EPIC/CMS product (meaning that it would not be available from the
licensee), those customers running both the EPIC/VSE and EPIC/CMS
would effectively be forced to obtain them both from Computer
Associates.
(I estimate that this situation affects about 10-20% of the EPIC/VSE
customer base.)
3. No specific provisions for action(s) against Computer
Associates when conditions of the Proposed Final Judgement are
violated.
Explanation: It appears to most of us in the VSE community that
Computer Associate's intent IS to create a monopoly in the VSE
systems software market, and they are quite ruthless and devious
about it. They have already directly violated certain provisions of
the Proposed Final Judgement, and also seem to be deliberately
delaying its execution. Specific retribution for willful disregard
of the provisions of the Proposed Final Judgement need to be clearly
defined and carried out.
For example, under section ``VI. PRESERVATION OF ASSETS'',
Computer Associates is ordered to ``* * * continue to commit
resources, development and support to each Subject Software Product
at a level not materially less than that committed prior to the
announcement of the subject acquisition * * *''. However within 2
weeks after the Proposed Final Judgement was issued, in just the
EPIC/VSE group alone, 8 out of 20 employees were let go, including
developers and technical support personnel. The D.O.J. was notified
immediately, yet to date, nothing known has been done.
More recently, technical support was moved to a different office
to be handled by inexperienced personnel, and EPIC/VSE developers
have been assigned to other products. Computer Associates is
definitely not pursuing a ``hands-off'' approach to the subject
products while the terms of the Proposed Final Judgement are being
carried out, but rather one that appears to be deliberately
sabotaging them.
4. Non-exclusivity of the license proposal.
Explanation: In the VSE tape and disk management arena alone,
Computer Associates started with a product it developed, called
Dynam/T/D/FI. Then it brought up all the other major players: Epat,
System/Manager, and IPIC/VSE, creating a complete monopoly. It
appears that the D.O.J.
[[Page 6032]]
compromised with Computer Associate's lawyers in coming up with the
non-exclusive license idea.
Who ever heard of 2 companies marketing the same product(s) to
foster competition? Do Ford and GM market any of the same products?
No, they market different products. If Computer Associates could be
equated to General Motors, it would already own Ford and all the
Japanese and European automobile manufacturers; and Legent would be
Chrysler. Then the D.O.J. Proposed Final Judgement would be
equivalent to an order requiring GM to jointly market Jeeps with
Hyundai, while maintaining ownership of the engine and vehicle
assembly plants. It's ludicrous, and simply won't work in the real
world.
In conclusion, the only workable solution I see is to require
Computer Associates to divest, i.e. completely sell-off and cease
marketing, all Legent products that are in any way integrated with
the five already covered by the Proposed Final Judgement. And this
must be done quickly, before Legent's entire VSE product line and
customer base are destroyed. And finally, Computer Associates should
be severely fined for all present violations of the Proposed Final
Judgement and forced in complete compliance ASAP.
One final note: although I am a former Legent employee, I am not
``disgruntled''. I worked in the VSE community long before I worked
for Legent, and still desire to see it prosper. A Computer
Associate's monopoly on VSE systems software is in no one's best
interest except theirs. I urge the court to modify the Proposed
Final Judgement to prevent such an occurrence at ALL levels.
Sincerely,
Brian W. Gore,
101 Mira Mesa, Rancho Santa Margarita, CA 92688.
Certificate of Service
The undersigned certifies that he is a paralegal employed by the
Antitrust Division of the United States Department of Justice, and
is a person of such age and discretion to be competent to serve
papers. The undersigned further certifies that on February 1, 1996,
he caused true copies of the Response of the United States to Public
Comments, and this Certificate of Service, to be served upon the
person at the place and address stated below:
Counsel for Computer Associates
Richard L. Rosen, Esq., Arnold & Porter, 555 12th Street, NW.,
Washington, D.C. 20004 (by hand delivery)
Dated: February 1, 1996.
Joshua Holian,
Paralegal, U.S. Department of Justice, Antitrust Division, Computers &
Finance Section, 555 4th Street, NW., Room 9901, Washington, D.C.
20001, (202) 307-6200.
[FR Doc. 96-3393 FIled 2-14-96; 8:45 am]
BILLING CODE 4410-01-M
