[Federal Register Volume 62, Number 67 (Tuesday, April 8, 1997)]
[Notices]
[Pages 16814-16815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8940]
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FEDERAL TRADE COMMISSION
[File No. 971-0049]
Autodesk, Inc.; Softdesk, Inc.; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair or deceptive acts or practices and unfair methods of
competition, this consent agreement, accepted subject to final
Commission approval, would prohibit, among other things, Autodesk--a
San Rafael, California-based developer and marketer of computer-aided
design (CAD) software which intends to acquire Softdesk, Inc.--from
reacquiring the ``IntelliCADD'' CAD engine that Softdesk recently sold
to Boomerang Technology, Inc. The complaint accompanying the consent
agreement alleged that Autodesk's $90 million acquisition of Softdesk,
as originally proposed, would have substantially lessened competition
in the development and sale of CAD software engines.
DATES: Comments must be received on or before June 9, 1997.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pennsylvania Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Howard Morse, Federal Trade
Commission, S-3627, 6th St. and Pennsylvania Ave., NW., Washington, DC
20580. (202) 326-2949.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Sec. 2.34 of the
Commission's rules of practice (16 CFR 2.34), notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the accompanying complaint. An electronic copy of the
full text of the consent agreement package can be obtained from the
Commission Actions section of the FTC Home Page (for March 31, 1997),
on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A
paper copy can be obtained from the FTC Public Reference Room, Room H-
130, 6th Street and Pennsylvania Avenue, NW., Washington, DC 20580,
either in person or by calling (202) 326-3627. Public comment is
invited. Such comments or views will be considered by the Commission
and will be available for inspection and copying at its principal
office in accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules
of practice (16 CFR 4.9(b)(6)(ii)).
Analysis to Aid Public Comment on the Provisionally Accepted
Consent Order
The Federal Trade Commission (``the Commission'') has accepted,
subject to final approval, an Agreement Containing Consent Order
(``Agreement'') from Autodesk, Inc. (``Autodesk'') and Softdesk, Inc.
(``Softdesk'').
The proposed Order has been placed on the public record for sixty
(60) days for reception of comments from interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the Agreement
and the comments received and will decide whether it should withdraw
from the Agreement or make final the Agreement's proposed Order.
The Commission's investigation of this matter concerns a proposed
acquisition by Autodesk of Softdesk. In December 1996, Autodesk and
Softdesk entered into an Agreement and Plan of Reorganization whereby
Autodesk will acquire 100% of the voting securities of Softdesk in
exchange for share of Autodesk common stock with a value of $90 million
(the ``Acquisition'').
The Agreement Containing Consent Order would, if finally accepted
by the Commission, settle charges that the Autodesk acquisition of
Softdesk as originally proposed may have substantially lessened
competition in the development and sale of computer aided design
(``CAD'') engines for Windows-based personal computers in the United
States or in North America. The Commission has reason to believe that
Autodesk's original proposal to acquire Softdesk violates Section 5 of
the Federal Trade Commission Act and that the acquisition, if
consummated, would have violated Section 7 of the Clayton Act and
Section 5 of the Federal Trade Commission Act, unless an
[[Page 16815]]
effective remedy eliminates likely anticompetitive effects.
The Proposed Complaint
According to the Commission's proposed complaint, Autodesk is a
public company that develops and markets computer-aided design
(``CAD'') software for use in the architecture, engineering and
construction (the ``AEC'') industry. Autodesk offers a portfolio of
software products including a CAD engine marketed and sold under the
name ``AutoCAD,'' for use on Windows-based personal computers. Autodesk
has had annual sales in excess of $530 million. Softdesk has had annual
sales in excess of $40 million. Softdesk offers a portfolio of
applications software that is used in conjunction with and to
supplement CAD engines, primarily AutoCAD. Softdesk also was developing
and had tested a CAD engine, referred to as ``IntelliCADD,'' for use on
personal computers that would be used as a substitute and replacement
of AutoCAD.
According to the Commission's proposed complaint, a relevant line
of commerce within which to analyze the effects of Autodesk's
acquisition of Softdesk is the market for CAD engines for Windows-based
personal computers. CAD engines are critical to architects and
engineers to plan and design everything from manufactured products, to
buildings, to utilities, and water treatment plants. The complaint
alleges that there are no economic substitutes for CAD engines for
Windows-based personal computers. CAD engines for Unix-based computers,
the only theoretical alternative, are inadequate substitutes because of
the higher costs to acquire the hardware and software and higher costs
to maintain and service.
The Commission's proposed complaint further alleges that Autodesk
is the dominant provider of Windows-based CAD engines, accounting for
nearly 70% of the installed base, and alleges that the relevant U.S. or
world market for Windows-based CAD engines is highly concentrated.
The complaint further alleges that de novo entry or fringe
expansion into the relevant market sufficient to deter or defeat
reductions in competition resulting from Autodesk's acquisition of
Softdesk and the IntelliCADD technology would not be timely or likely.
According to the proposed complaint, developing a CAD engine would
require an expenditure of substantial sunk costs and would be time-
consuming. The large installed base of AutoCAD users necessitates that
any new CAD engine developed and offered in the market offer file
compatibility and transferability to AutoCAD in order to gain sales.
Users of AutoCAD have a large number of drawings in the AutoCAD format.
Moreover, many users must share files they create with others who must
be able to read and edit those files using their CAD software. Since
most engineers use AutoCAD, any alternative CAD engine must have the
capability to read and be compatible with AutoCAD files without losing
substantial amounts of data or information.
According to the complaint, Softdesk's IntelliCADD product was
being developed to compete directly with and to replace AutoCAD as a
pc-based CAD engine. IntelliCADD was in the final stages of testing and
was within months of introduction to the market when the current
proposal by Autodesk to acquire Softdesk was announced. The IntelliCADD
product, if brought to market, would have provided direct and
significant competition to Autodesk in that it offered file
compatibility and file transferability with AutoCAD, a feature that
other pc-based CAD engines currently in the market do not offer.
Furthermore, the Commission's complaint also alleges that some
customers have already altered their buying decisions in anticipation
of the introduction of IntelliCADD by delaying or postponing purchasing
AutoCAD.
After being advised by Commission staff of these competitive
concerns, Softdesk sold and transferred all of its rights and title to
the IntelliCADD product to Boomerang Technology, Inc. (``Boomerang'')
on February 21, 1997. Boomerang is a company created and owned by the
developer of the IntelliCADD product, a former Softdesk employee.
Boomerang now has full rights and title to the IntelliCADD product and
has assigned its rights to Visio Corporation (``Visio''). As a result,
the IntelliCADD product is now under the control of an entity
independent of Autodesk and Softdesk, which is free to fully develop
and market the IntelliCADD product.
The proposed complaint alleges that the acquisition by Autodesk of
the IntelliCADD product would have substantially lessened competition
by, among other things, eliminating actual and potential competition to
Autodesk's AutoCAD product, likely resulting in continued high prices
for CAD engines.
The Proposed Consent Agreement
The proposed Order accepted for public comment contains provisions
that would prohibit either Autodesk or Softdesk from re-acquiring the
IntelliCADD product, or any entity that owns or controls the
IntelliCADD technology, without prior notice to the Commission for a
period of ten (10) years. The purpose of this prohibition is to ensure
the continued development and sale of the IntelliCADD product to
compete with the merged Autodesk/Softdesk, to ensure that the
IntelliCADD product remains in the hands of an independent competitor
in the development and sale of CAD engines for Windows-based personal
computers, and to remedy the lessening of competition as alleged in the
Commission's complaint.
The proposed order would also prohibit Autodesk or Softdesk from
enforcing any non-compete or confidentiality agreements against any
former employees of Softdesk whose primary responsibility was the
development of the IntelliCADD product that may now or in the future be
an employee of Boomerang or its assigns. The purpose of these
provisions is to ensure that Boomerang or its assigns remain a viable
competitor to Autodesk and Softdesk in the development and sale of the
IntelliCADD product, thereby fostering a competitive environment for
the sale of CAD engines for Windows-based personal computers.
Pending final issuance of this proposed order, Autodesk and
Softdesk have also entered into an Interim Agreement whereby they have
agreed to be bound to the provisions and terms of the proposed Order
pending and until final issuance by the Commission.
The purpose of this analysis is to facilitate public comment on all
aspects of the proposed Order. This analysis is not intended to
constitute an official interpretation of the Agreement or the proposed
Order or in any way to modify the terms of the Agreement or the
proposed Order.
Donald S. Clark,
Secretary.
[FR Doc. 97-8940 Filed 4-7-97; 8:45 am]
BILLING CODE 6750-01-M