[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