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United States v. SunGard Data Sys.

United States District Court for the District of Columbia

November 14, 2001, Decided

Civil Action No. 01-02196 (ESH)

Opinion

 [*173]  REDACTED MEMORANDUM   [**2]    OPINION

Plaintiff, the United States of America, has filed suit pursuant to Section 15 of the Clayton Act, 15 U.S.C. § 25, to enjoin SunGard Data Systems, Inc. ("SunGard") from acquiring the disaster recovery solutions  [*174]  assets of Comdisco, Inc. ("Comdisco") on the grounds that the acquisition would substantially lessen competition in the market for shared hotsite disaster recovery services for mainframe and midrange computers, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.

Defendants have set forth a series of arguments in opposition to the government's complaint. First, defendants dispute the government's narrow definition of the relevant product market. Contending that the appropriate market is not simply shared hotsite services, but the entire continuum of disaster recovery services, defendants assert that the proposed acquisition will not substantially lessen competition in this broader product market. Second, defendants argue that, even assuming that the government has established a presumption that the acquisition would violate the Clayton Act, the transaction will not actually produce an anticompetitive effect.  [**3]  Defendants offer six theories in support of this argument: 1) plaintiff's statistics regarding the product market are unreliable because they do not reflect the rapidly changing technologies in the disaster recovery industry; 2) price discrimination would not be profitable for the new entity under a Critical Loss analysis, because of the risk of losing too many existing customers; 3) SunGard and Comdisco are not in competition for the vast majority of customers, and therefore, their merger will have only a minimal anticompetitive effect; 4) there are a host of domestic and foreign companies that are poised to enter the market due to the low barriers to entry; 5) defendants' knowledgeable and sophisticated customers would impede the exercise of market power by the new entity; and 6) the efficiencies resulting from the transaction will actually cause prices to drop and service to improve.

The proposed acquisition has been postponed by agreement of the parties pending the Court's decision. After thorough consideration of the parties' briefs; the exhibits, testimony, and arguments presented by the parties at an expedited trial on November 8 and 9, 2001; and the proposed findings of fact [**4]  and conclusions of law submitted by the parties; and for the reasons set forth herein, the Court will deny the plaintiff's request for permanent injunctive relief. This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law.

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172 F. Supp. 2d 172 *; 2001 U.S. Dist. LEXIS 19098 **; 2001-2 Trade Cas. (CCH) P73,493

UNITED STATES OF AMERICA, Plaintiff, v. SUNGARD DATA SYSTEMS, INC., et al., Defendants.

Disposition:  [**1]  Plaintiff's request for permanent injunction DENIED. Complaint DISMISSED WITH PREJUDICE.

CORE TERMS

hotsite, customers, disaster, midrange, quick-ship, switch, mainframe, percent, parties, defendants', Merger, recovery service, external, acquisition, relevant market, vendors, mobile, recovery system, dedicated, coldsites, computer system, work area, declarations, Guidelines, redacted, depending, products, back-up, substantial number, Deposition

Antitrust & Trade Law, Clayton Act, Remedies, Injunctions, Evidence, Burdens of Proof, Ultimate Burden of Persuasion, Mergers & Acquisitions Law, Antitrust, Market Definition, General Overview, Scope, US Federal Trade Commission Actions, Remedial Powers, Antitrust Statutes, Clayton Act, Regulated Industries, Financial Institutions, Bank Mergers, Inferences & Presumptions, Presumptions, Rebuttal of Presumptions, Horizontal Mergers, Admiralty & Maritime Law, Maritime Contracts, Merger Guidelines, Regulated Practices, Market Definition, Relevant Market, Relevant Market, Product Market Definition