[Federal Register Volume 68, Number 15 (Thursday, January 23, 2003)]
[Notices]
[Pages 3267-3272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1419]


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DEPARTMENT OF JUSTICE

Antitrust Division


Public Comments and Response on Proposed Final Judgment in United 
States of America v. The MathWorks, Inc. and Wind River Systems, Inc.

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comments 
received on the proposed Final Judgments on United States of America v. 
The MathWorks, Inc. and Wind River Systems, Inc., Civil Action No. 02-
888-A, filed in the United States district court for the Eastern 
District of Virginia, together with the United States' response to the 
comments.
    Copies of the comment and response are available for inspection at 
Room 200 of the Department of Justice, Antitrust Division, 325 Seventh 
Street, NW., Washington, DC 20530, telephone (202) 514-2481, and at the 
Office of the Clerk of the United States District Court for the Eastern 
District of Virginia, Albert V. Bryan United States Courthouse, 401 
Courthouse Square, Alexandria, VA 22314. Copies of any of these 
materials may be obtained upon request and payment of a copying fee.

Constance K. Robinson,
Director of Operations.

United States' Response to Public Comments

    Pursuant to Section 5(d) of the Clayton Act, as amended by 
Section 2 of the Antitrust Procedures and Penalties Act (codified at 
15 U.S.C. 16(b)-(h) (the ``Tunney Act'')), the United States 
responds to public comments received regarding the proposed Final 
Judgments submitted for entry in this civil antitrust proceeding.

I. Background

    On June 21, 2002, the United States filed a civil antitrust 
Complaint alleging that The MathWorks, Inc., (``The MathWorks'') and 
Wind River Systems, Inc. (``Wind River''), head-to-head competitors 
in the sale of dynamic control system design software products, 
restrained competition in violation of Section 1 of the Sherman Act, 
15 U.S.C. 1. The Complaint alleged that, on February 16, 2001, The 
MathWorks and Wind River entered into a number of agreements 
(hereinafter, collectively, the ``MATRIXx Agreement'') pursuant to 
which, inter alia, The MathWorks obtained the executive worldwide 
right to price and sell Wind River's MATRIXx tools for a period of 
two and one half years. As a result of the MATRIXx Agreement, actual 
competition between Wind River's MATRIXx toolset and The MathWorks' 
Simulink toolset has been eliminated.
    In April 2000, Wind River acquired Integrated Systems, Inc. 
(``ISI''). At the time, ISI was a well regarded vendor of software, 
tools, and engineering services for the embedded systems market.\1\ 
Its embedded real-time operating system, deployed in more than 38 
million devices worldwide as of 2000, was suppled to telecom/
datacom, consumer electronics, automotive, aerospace, and emerging 
Internet appliance customers. As part of its software portfolio it 
produced the MATRIXx family of software products, which are 
standalone products designed to automate the analysis, modeling, 
generation of code for, and simulation of, complex control systems. 
Although ISI had spent considerable resources developing MATRIXx 
since the mid-1980s, its primary business continued to revolve 
around the embedded systems market.
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    \1\ Embedded systems are specialized computing systems used to 
control devices such as handheld computers, appliances or cars. 
These systems are typically invisible to the end-user, but enable 
operation of the devices.
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    Wind River, itself a significant vendor of software for embedded 
systems, pursued the acquisition of ISI, in large part, to obtain a 
skilled pool of embedded system software developers that it hoped 
would shorten the time it takes to reach the market of critical new 
embedded system products. Wind River soon came to view MATRIXx as a 
struggling product line within ISI with small revenue and no growth 
potential. More importantly, the MATRIXx market was neither within 
Wind River's core competency nor its central strategic focus for the 
future. Thus, Wind River decided not to devote any of its resources 
to the continued development and sale of MATRIXx.

    Shortly after Wind River's acquisition of ISI, The MathWorks 
approached Wind River and began vigorously negotiating to acquire the 
MATRIXx assets. On February 16, 2001, The MathWorks and Wind River 
entered into the MATRIXx Agreement under which Wind River granted The 
MathWorks exclusive distribution and license rights to the MATRIXx 
toolset and the MATRIXx intellectual property (including the right to 
incorporate MATRIXx source code into The MathWorks products) during a 
thirty-month license period beginning on February 16, 2001. Following 
the expiration of the thirty-month license period, The MathWorks would 
have the option to acquire MATRIXx.
    Under the MATRIXx Agreement, The MathWorks was required to provide 
two years of customer support (ending in February 2003) for existing 
MATRIXx users.\2\ While Wind River agreed to

[[Page 3268]]

continue fulfilling its existing customer support obligations, as well 
as to provide ``critical'' bug fixes during the license period, the 
MATRIXx Agreement provided that Wind River would not produce new 
versions of MATRIXx with feature enhancements. In fact, The MathWorks 
announced at the time it entered into the MATRIXx Agreement that there 
would be no further development of the MATRIXx products. The MathWorks 
and Wind River also agreed on the pricing of Simulink, The MathWorks' 
dynamic control system software product that competed head-to-head with 
MATRIXx, when purchased by MATRIXx customers. The companies 
specifically agreed that The MathWorks would give customers with 
current MATRIXx licenses, that switched to The MathWorks' suite of 
products, a discount amounting to 50% off the list price of The 
MathWorks' products for those that switched in the first year of the 
MATRIXx Agreement and 25% off for those that switched in the second 
year of the MATRIXx Agreement.
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    \2\ Wind River retained rights to the MATRIXx intellectual 
property during the license period in order to provide support 
service to two International Space Station customers.
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    In return, The MathWorks agreed to make payments to Wind River 
totaling $11,500,000 over a three-year period on a set schedule, which 
were not contingent on the volume of MATRIXx products The MathWorks 
sold. Further, Wind River granted The MathWorks an option to purchase 
MATRIXx and certain MATRIXx intellectual property (e.g., the source 
code, customer lists, trademarks and copyrights) twenty-eight months 
after closing for an additional sum of $2,000,000. Finally, the MATRIXx 
Agreement assigned certain patent rights to The MathWorks for $500,000.
    On the same date that the United States filed its Complaint against 
The MathWorks and Wind River, the United States filed a Stipulation and 
proposed Final Judgment with Wind River that was designed to obtain the 
divestiture of the MATRIXx assets to a competitively viable third 
party. Although the nominal owner of the MATRIXx assets, Wind River's 
consent alone was insufficient to effectuate fully the relief sought by 
the United States in the Complaint because The MathWorks had previously 
acquired significant rights in the MATRIXx assets under the MATRIXx 
Agreement. The lawsuit therefore continued against The MathWorks. On 
August 15, 2002, the United States and The MathWorks filed a 
Stipulation and proposed Final Judgment that, in conjunction with the 
proposed Final Judgment agreed to by Wind River, would lead to either 
the prompt and certain divestiture of the MATRIXx assets to a 
competitively viable third party or the dismissal of the Complaint in 
this action.
    The proposed Final Judgment agreed to by The MathWorks provides a 
framework detailing the manner and process pursuant to which a court-
appointed Trustee would seek to sell the MATRIXx assets to a 
competitively viable third party. Among other things, this framework 
specifically outlines the rights and responsibilities of the United 
States and The MathWorks, addresses the period of time in which a 
definitive sales and licensing agreement must be consummated, and sets 
a minimum price at which the MATRIXx assets may be sold.
    The Court may enter the proposed Final Judgments against Wind River 
and The MathWorks following compliance with the Tunney Act.\3\ The 
Tunney Act, among other things, gives the public a 60-day period to 
submit comments about the proposed Final Judgments. The 60-day comment 
began on October 21, 2002, when the proposed Final Judgments and the 
Competitive Impact Statement (``CIS'') were published in the Federal 
Register (67 FR 64657 (2002)), and expired on December 20, 2002. During 
that period, two comments were received.
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    \3\ The Competitive Impact Statement (``CIS'') sets out the 
standard to be applied by the Court in determining whether entry of 
the proposed Final Judgment is in the public interest. CIS at 20-23.
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II. Response to Public Comments

    On November 18, 2002, the United States received a comment 
regarding The MathWorks' proposed Final Judgment in this matter from 
Sudarshan Bhat addressing a single provision of The MathWorks' proposed 
Final Judgment. A true and correct copy of Mr. Bhat's comment, with 
confidential information redacted, is attached as Exhibit A. On 
December 20, 2002, the United States received a comment regarding the 
proposed Final Judgments in this matter from The Center for the 
Advancement of Capitalism (``CAC'') which purports to address the 
propriety of the proposed Final Judgments en toto. A true and correct 
copy of the CAC's comment is attached as Exhibit B. Each of these 
comments is addressed individually below.
A. Bhat Comment
    Mr. Bhat complains that the minimum sale price of $2 million plus 
the costs and expenses of the Trustee for the MATRIXx assets, as 
required by Section IV(L) of The MathWork's proposed Final Judgment, 
``makes no financial sense without additional contingencies.'' Bhat 
Comment at 1. He explains that immediately prior to The MathWorks 
acquisition of the MATRIXx assets, MATRIXx enjoyed annual revenue of 
$15-$16 million. Since The MathWorks acquired the MATRIXx assets 
however, MATRIXx revenue has fallen and ``is likely to reduce much 
further without the proper measures to restore competitiveness in the 
dynamics and control tools marketplace.'' Id. Given this, Mr. Bhat 
concludes that ``[t]he 2 million dollar purchase price is too much to 
risk in the current market conditions.'' Id. In essence, Mr. Bhat 
concludes that a divestiture of the MATRIXx assets will fail because 
the minimum sale price is not justified given the current level of 
annual revenue generated by MATRIXx.
    Mr. Bhat insists that ``true competition can only be restored when 
marketing, customer support, development, sales and annual, revenues 
for MATRIXx assets are restores to the annual 15-16 million dollar 
levels immediately prior to Mathworks acquisition of MATRIXx assets.'' 
Id. Therefore, he suggests that the United States ``impose an annual 
penalty on Mathworks equal to MATRIXx sales revenue shortfall from the 
2001 15-16 million dollar levels until the MATRIXx revenues are 
restores to the 2001 levels or until September 1, 2007, whichever comes 
first.'' Id. at 2. Mr. Bhat believes this annual penalty should ``be 
used to cover any operating budget shortfall for whoever is best 
qualified to acquire MATRIXx assets and restore competition to the 
marketplace.'' Id. Finally, Mr. Bhat indicates that his intention to 
bid for the MATRIXx assets is conditioned on the adoption of his 
suggested additions to the proposed Final Judgment.
    The United States disagrees with the conclusions asserted by Mr. 
Bhat in his comment. In light of the fact that the MATRIXx assets have 
been successfully sold, it is unnecessary to amend the proposed Final 
Judgment in the manner suggested by Mr. Bhat.\4\ On January 14, 2003, 
SoundView Technology

[[Page 3269]]

Corporation (``SoundView''), as the court-appointed Trustee in this 
matter pursuant to its obligations under Section IV(I) of the proposed 
Final Judgment, reported to the United States that National Instruments 
Corporation acquired the MATRIXx assets on January 10, 2003, pursuant 
to a definitive sales and licensing agreement reached within the 
framework outlined in the proposed Final Judgment. Pursuant to Section 
IV(M)(1) of the proposed Final Judgment, the United States has 
concluded that National Instruments Corporation intends to invest in 
and develop the MATRIXx product line and has the potential to be a 
viable competitor in the sale of dynamic control system design 
software.
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    \4\ Nor does the United States believe it is appropriate to 
impose a ``penalty'' on The MathWorks equal to MATRIXx revenue 
shortfalls from 2001 levels. Bhat Comment at 2. This is a Government 
civil action for injunctive relief, and thus monetary damages are 
not available in this case. See 15 U.S.C. 4 (authorizing the United 
States ``to institute proceedings in equity to prevent and restrain 
such violations''). Moreover, the goals of the remedy in this case 
are to enjoin the unlawful conduct and restore competitive 
conditions in the market affected by The MathWorks' conduct. See 
Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 697 
(1978); United States v. E.I. du Pont de Nemours & Co., 366 U.S. 
316, 326 (1961).
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B. CAC Comment
    CAC is a non-profit organization with the mission or providing 
analysis based on Ayn Rand's philosophy of objectivism.\5\ CAC insists 
that the United States should withdraw the proposed Final Judgments and 
dismiss the Complaint in this matter or that the Court should reject 
entry of the proposed Final Judgments under the Tunney Act. CAC Comment 
at 2. CAC concedes, however, that its philosophical opposition to the 
antitrust laws is ``blatantly obvious.'' Id. at 3. This opposition 
animates every aspect of CAC's comment. CAC claims that ``[t]his'' case 
reveals both the fundamental defects of both the antitrust laws and the 
strategy employed by the Government in their enforcement.'' Id. CAC 
argues that ``[f]ree competition cannot be enforced by government 
flat'' and that the DOJ ``relies on static rules that fail to account 
for the complexity of business and yet seek to enforce an unjust and 
unworkable egalitarianism.'' Id. Further, CAC claims that the ``DOJ can 
not speak for the `public interest,' because no such intest has ever 
existed.'' Id.
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    \5\ Ayn Rand, a novelist-philosopher, first expressed her 
philosophy of objectivism in the best-selling novels, The 
Fountainhead (1943) and Atlas Shrugged (1957). On the issue of 
capitalism, she has stated: ``When I say `capitalis' I mean a pure, 
uncontrolled, unregulated laissez-faire capitalism with a separation 
of economics, in the same way and for the same reasons as a 
separation of state and church.'' ``The Objectivist Ethics'' in The 
Virtue of Selfishness (1964).
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    CAC, in essence, challenges the constitutionality of the Sherman 
Act and advocates for a form of laissez-faire capitalism unregulated by 
the Government. The United States disagrees with CAC's position. The 
Supreme Court has, on numerous occasions, upheld the constitutionality 
of the Sherman Act and the prohibition in Section 1 of the Act against 
any contract, combination or conspiracy that ``unreasonably'' deprives 
consumers of the benefits of competition or that would otherwise result 
in higher prices or inferior products and services. See Standard Oil 
Co. v. United States, 221 U.S. 1, 50, 58 & 68-70 (1911); see also 
United States v. Joint Traffic Ass'n, 171 U.S. 505, 570-73 (1898). In 
any event, challenging the constitutionality of the Sherman Act is far 
beyond the scope of this Tunney Act proceeding. See United States v. 
Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995) (Court's role 
under the Tunney Act is limited to reviewing the remedy in relationship 
to the violations that the United States alleges in its Complaint.).
    CAC also argues that ``[n]othing in the proposed judgment benefits 
producers, consumers, or the foundations of the free market, unless it 
is held that capitalism is advanced by turning producers into serfs.'' 
CAC Comment at 3. CAC believes that ``while the customer's short-term 
costs might increase as a result of the MATRIXx acquisition, in the 
long term, competition would benefit from Wind River's decision to shed 
an unprofitable and stagnant product line.'' Id. For CAC argues, ``[i]n 
a free market, the more efficient allocation of resources is often 
fostered through the natural elimination of unnecessary or redundant 
competition, as appears to be the case here.'' Id. Accordingly, CAC 
asserts that ``[i]n the absence of this judgment, MATRIXx would be 
given the timely death the marketplace has condemned it to.'' Id. at 4. 
CAC's arguments suggest a superficial understanding of the proposed 
Final Judgments and the manner in which they are intended to address 
the Complaint in this matter.
    During the United States' investigation in this matter, the 
Defendants argued that the MATRIXx assets had no economic value in the 
marketplace and that no competitively viable third party would be 
interested in purchasing the MATRIXx assets for any significant amount 
of money. Taking Defendants' arguments, along with customer concerns, 
into account, the United States agreed to a proposed settlement that 
would both test Defendants' assertions as to the MATRIXx assets' market 
value and maximize the possibility of restoring in a timely manner 
competition lost as a result of the illegal conduct. At the time, the 
United States firmly believed that one or more competitively viable 
purchasers existed and that an independent agent would succeed in 
finding a buyer. Pursuant to Section IV(O) of The MathWorks' proposed 
Final Judgment, however, the United States agreed that if no 
alternative viable purchaser emerged, the United States would dismiss 
the Complaint in this action. As noted above, SoundView, the court-
appointed Trustee charged with attempting to sell the MATRIXx assets, 
has informed the United States that it has successfully sold the 
MATRIXx assets pursuant to a definitive sales and licensing agreement 
that meets the requirements of The MathWorks' proposed Final Judgment. 
The proposed Final Judgment in this matter strikes an appropriate 
balance between the public interest of prohibiting conduct the effect 
of which is to substantially lessen competition, and the desire for the 
marketplace to decide the economic and competitive value of goods and 
services based on their relative merits.

III. Conclusion

    Mr. Bhat urges the United States to amend The MathWorks' proposed 
Final Judgment in order to make the MATRIXx assets more valuable to 
prospective purchasers thereby justifying the required minimum sales 
price. CAC, on the other hand, urges the Court to reject the proposed 
Final Judgments altogether and dismiss the Complaint with prejudice. 
The United States, however, has concluded that the proposed Final 
Judgments reasonably and appropriately addresses the harm alleged in 
the Complaint. Therefore, following publication of this Response to 
Comments in the Federal Register and submission of the United States' 
Certificate of Compliance with the Tunney Act, the United States 
intends to request entry of the proposed Final Judgments upon the 
Court's determination that entry is in the public interest.
    Dated: January 15, 2003.

    Respectfully submitted,

James J. Tierney,
Patricia A. Brink,
Kenneth W. Gaul,
Jeremy West,
J. Roberto Hizon,
David E. Blake-Thomas,
Patrick O'Shaughnessy,
Trial Attorneys.

U.S. Department of Justice, Antitrust Division, Networks & Technology 
Section, 600 E Street, NW., Suite 9500, Washington, DC 20530, Tel: 202/
307/6200, Fax: 202/616-8544.

Paul J. McNulty,
United States Attorney.

By: Richard Parker,
Assistant United States Attorney, VSB No. 44751, 2100 Jamieson Avenue, 
Alexandria, VA 22314, Tel: 703/299-3700.

[[Page 3270]]

Certificate of Service

    I certify that on January 15, 2003, a true and correct copy of the 
United States' Response to Public Comments, related to the proposed 
Final Judgments in this matter against Defendants and agreed to by 
Defendants pursuant to the Stipulations and Orders filed with the 
Court, was served on the following counsel:

Counsel for Wind River Systems, Inc.

Richard L. Rosen,
Arnold & Porter, 555 Twelfth Street, NW., Washington, DC 2004-1206, 
Fax: 202/942-5999, by U.S. Mail.

Counsel for The Math Works, Inc.

Thane D. Scott,
Palmer & Dodge, LLP, 111 Huntington Avenue, Boston, Massachusetts 
02199-7613, Fax: 617/227-4420, by: U.S. Mail.

J. Mark Gidley,
White & Case, LLP, 601 Thirteenth St., NW., Washington, DC 20005-3807, 
Fax: 202/639-9355, by: U.S. Mail.
James J. Tierney.
November 1, 2002.
To Attn: Reneta Hesse, Chief,
Networks and Technology Litigation Section, Antitrust Division, U.S. 
Department of Justice, Washington, DC 20530.

Re: MATRIXx Asset Sale contingencies,
Justice Department Settlement with Mathworks, Inc.

    Dear Hesse, I believe the 2 million dollar sale price plus the US 
Department of Justice trustee costs is acceptable if the additional 
MATRIXx revenue shortfall contingencies mentioned later in this letter 
are imposed on Mathworks to quickly and effectively restore 
competitiveness to the dynamics and control tools marketplace.
    The MATRIXx assets sale makes no financial sense without additional 
contingencies. The 2 million dollar purchase price is too much risk in 
the current market conditions. The risk is due to severely reduced 
[redacted as confidential] annual MATRIXx revenue under Mathworks that 
is likely to reduce much further without the proper measures to restore 
competitiveness in the dynamics and control tools marketplace.
    It was Mathworks that blatantly committed anti-trust violation of 
Section 1 of the Sherman Act. It must be Mathworks that pays for 
restoring competition in the marketplace. It is just not fair for the 
MATRIXx customers to be held hostage and pay the price for restoration 
of credibility to the MATRIXx products.
    From a marketing standpoint large legacy aerospace projects 
(examples are International Space Station and Boeing projects) have too 
much invested in MATRIXx tools over the last two decades that simply 
cannot switch to Simulink/RealTime Workshop tools because of 
prohibitive costs, lack of Ada support and lack of tool maturity. 
MATRIXx tools SystemBuild and AutoCode has evolved and has been 
successfully used on large aerospace projects for over 20 years while 
Simulink and RealTime Workshop have only been around for about 5 years. 
RealTime Workshop Ada has not even been released.
    I believe true competition can only be restored when marketing, 
customer support, development, sales and annual revenues for MATRIXx 
assets are restored to the annual 15-16 million dollar levels 
immediately prior to Mathworks' acquisition of MATRIXx assets. The 
software development effort for MATRIXx under Wind River for financial 
year 2001 is estimated at about 2.5 million dollars. The marketing, 
customer support and sales were rolled into the overall WindRiver 
budget.
    An ISI colleague of mine has already contacted a large number of 
people who were MATRIXx software developers just prior to Mathworks' 
acquisition of MATRIXx assets and confirmed that a substantial number 
of them were willing to join our group or for that matter any group 
willing to acquire MATRIXx assets and repair the market damage 
inflicted on the product by Mathworks. Formation of such a workforce 
would immediately place a demand for MATRIXx operating budgets which I 
would estimate about 4-5 million dollars annually. Compared to all the 
potential buyers, some key ex-ISI employees, including myself, are the 
most qualified to put together the original ISI/WindRiver team of 
MATRIXx developers and restore competition in the marketplace. And I 
urge the US Department of Justice to seriously evaluate this issue when 
choosing a suitable buyer for the MATRIXx assets.
    I believe it is imperative that the US Department of Justice impose 
an annual penalty on Mathworks equal to MATRIXx sales revenue shortfall 
from the 2001 15-16 million dollar levels until the MATRIXx revenues 
are restored to the 2001 levels or until September 1, 2007, whichever 
comes first. These revenues are to be used to cover any operating 
budget shortfall for whoever is best qualified to acquire MATRIXx 
assets and restore competition to the marketplace. I also urge that the 
US Department of Justice require that Mathworks place such funds in 
escrow because there have been recent complaints by WindRiver about 
Mathworks not making the most recent installment payment.
    In summary when I place a bid for MATRIXx assets, the bid will be 
contingent upon Mathworks making up for the revenue shortfall until 
MATRIXx products is restored to the pre-2001 annual revenue levels. I 
would appreciate the cooperation of the US Department of Justice, its 
trustee, SoundView Technology Group, and all the parties involved to 
make this happen and restore competitiveness to the dynamics and 
control tools marketplace.

Sincerely,

/S/

Sudarshan P. Bhat,
1410 Blackstone Rd, San Marino, CA 91108, 626-292-7479 (home), 626-379-
9021 (cell).

Comments of The Center for the Advancement of Capitalism to the 
Proposed Final Judgment

    Pursuant to the Tunney Act \1\, The Center for the Advancement of 
Capitalism submits the following comments in response to the Proposed 
Final Judgments filed with the Court on June 21 and August 15, 2002.
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    \1\ Antitrust Procedures and Penalties Act, 15 U.S.C. Sec.  
16(b)-(h).
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Introductory Statement

    The Center for the Advancement of Capitalism (``CAC'') is a 
District of Columbia corporation organized in 1998, and exempt from 
income tax under Section 501(c)(4) of the Internal Revenue Code. CAC's 
mission is to present to policymakers, the judiciary and the public 
analyses to assist in the identification and protection of the 
individual rights of the American people. CAC applies Ayn Rand's 
philosophy of Objectivism to contemporary public policy issues, and 
provides empirical studies and theoretical commentaries on the impact 
of legal and regulatory institutions upon the rights of American 
citizens.
    CAC has no financial interest in the outcome of this case, nor has 
CAC received any compensation from the defendants in connection with 
these comments.

Comments

    The Proposed Final Judgment (``PFJ'') currently before the Court 
seeks to undo the impact of the February 2001 agreement between 
MathWorks and Wind River. MathWorks obtained the exclusive right to 
distribute Wind River's MATRIXx software, and as a result MathWorks was 
able to combine

[[Page 3271]]

two stagnant products lines into a single offering. The United States 
claims this was illegal, because the loss of MATRIXx constituted a harm 
to consumers. Wind River customers complained to the United States that 
once MATRIXx was no longer serviced, they would ``have to begin a 
costly migration to the MathWorks' Simulink products.'' The United 
States initiated this case to preclude this from happening. The 
question now before the Court is whether the PFJ serves the interest. 
CAC believes that it does not.
    This case is part of a federal antitrust effort to micromanage 
various facets of the private technology sector. In the past year 
alone, the Department of Justice prosecuted Computer Associates 
International for their alleged conduct during the consummation of an 
otherwise lawful merger \2\, and the Federal Trade Commission imposed a 
settlement upon an industry that vehemently denied the need for 
government intervention.\3\
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    \2\ United States v. Computer Associates Int's, et al., Civil 
No. 01-020602 (D.D.C. April 23, 2002).
    \3\ In re American Institute for Conservation of Historic and 
Artistic Works, File No. 011-0244 (Sept. 10, 2002).
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    This matter picks up where those cases left off. Now the United 
States claims the right to force the sale of a business they know to be 
unprofitable to a mystery competitor that may not exist. The government 
wants to ``restore'' competition beyond the level that actually existed 
prior to the challenged conduct. In doing so, the United States has 
ignored the economic realities of the marketplace and the technical 
knowledge of the specific market they seek to regulate. Thus, the PFJ 
here results not from the United States acting in the public interest, 
but from the DOJ submitting a specious claim before the Court. For this 
reason, the United States should withdraw from the PFJ and dismiss its 
complaint, or in the alternative, the Court should reject entry of the 
PFJ under the Tunney Act.
    At the heart of this case is the independent viability of the 
MATRIXx product line. Wind River acquired control of MATRIXx when they 
acquired Integrated Systems, Inc., in April 2000. In its own 
competitive impact statement, the United States admits that MATRIXx was 
on the road to decline well before the consummation of the agreement 
challenged here:

    ``Wind River, itself a significant vendor of software for embedded 
systems, pursued the acquisition of ISI, in large part, to obtain a 
skilled pool of embedded system software developers that it hoped would 
shorten the time to market for critical new embedded system products. 
Wind River soon came to view MATRIXx as a struggling product line 
within ISI with small revenue and no growth potential. More 
importantly, the MATRIXx market was neither within Wind River's core 
competency nor central strategic focus or the future. Thus, Wind river 
decided not to devote any of its resources to the continued development 
and sale of MATRIXx.'' \4\

    \4\ 67 FR 64657, 64662 (October 21, 2002).
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    The Government never refutes or challenges Wind River's claims with 
respect to MATRIXx. Instead, the DOJ simply ignores these concerns, and 
merrily proceeds on the basis of alleged consumer harm. There is no 
effort to place the challenged conduct in an overall business context, 
nor does the DOJ consider any evidence that the defendants' agreement 
benefited competition. Instead, the DOJ relied upon its own prejudiced 
theories of antitrust, and imposed this proposed judgment to force the 
defendants' behavior to conform to the Government's expectations. The 
DOJ thus substituted its own business judgment for that of MathWorks 
and Wind River without any credible arguments or evidence.
    By the DOJ's admission, this case was initiated in large part by 
consumer complaints. Apparently, some MATRIXx users were unhappy at the 
prospect of having to pay the transitional costs of eventually 
converting to Simulink. An impartial observer would conclude that while 
the customers' short-term costs might increase as a result of the 
MATRIXx acquisition, in the long term, competition would benefit from 
Wind River's decision to shed an unprofitable and stagnant product 
line. In the free market, the more efficient allocation of resources is 
often fostered through the natural elimination of unnecessary or 
redundant competition, as appears to be the case here. Short-term 
pricing policies are not the overriding concern of the marketplace, yet 
they are the exclusive concern of the DOJ, which acts myopically to 
prevent any potential increase in consumer costs.
    Free competition cannot be enforced by government fiat. Competition 
is an inherently dynamic process that must account for multiple 
variables, including the freedom to either enter or exit the market as 
the facts demand. Businesses rely on the expertise of their officers, 
employees, and partners to ensure both the profitability of the firm 
and the fulfillment of consumer needs. Businesses that successfully 
answer the question of production gain customers and wealth, businesses 
that fail lose both.
    The DOJ, by contrast, relies on static rules that fail to account 
for the complexity of business and yet seek to enforce an unjust and 
unworkable egalitarianism. While claiming that it is protecting the 
free market, the Government maintains total faith in its ability to 
identify and enforce what is in the best interest of every single 
businessman and consumer in the United States absent their own un-
coerced choices. This faith is usually referred to as protecting the 
``public interest.''
    Reasonable people understand, however, that the DOJ can not speak 
for the ``public interest,'' because no such interest has ever existed. 
The United States is a nation predicated on the defense of individual 
rights, not the collective interests of opposed pressure groups. Every 
individual has the right to assert their right to economic self-
determination through the pursuit of voluntary trade. Objective laws 
are necessary to ensure the protection of individual rights in our 
system of voluntary trade, but that is far different than assigning the 
government arbitrary and capricious power to dictate economic outcomes, 
as is the situation here. In this case, the DOJ is suspending 
individual rights and replacing them with a definition of the ``public 
interest'' that doesn't hold water. Simply by asserting the 
metaphysical existence of the public interest in its enforcement of the 
antitrust laws, the DOJ denies almost every fact that drives the 
voluntary exchange between individuals in the free market.
    This case reveals both the fundamental defects of both the 
antitrust laws and the strategy employed by the Government in their 
enforcement. Previously, in the DOJ's answer to CAC's objections to its 
proposed settlement agreement in United States v. Computer Associates 
International, Inc., et al. \5\, the DOJ noted both CAC's philosophic 
opposition to the antitrust laws and the Supreme Court's history of 
upholding these laws. While CAC appreciates the DOJ's mastery of the 
blatantly obvious, we must respectfully point out that even within the 
context of the Supreme Court's odious approval of antitrust, the 
Government's position in this case and its subsequent settlement is 
logically defective.
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    \5\ 67 FR 66419 (Oct. 31, 2002).
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    Nothing in the proposed judgment benefits producers, consumers, or 
the

[[Page 3272]]

foundations of the free market, unless it is held that capitalism is 
advanced by turning producers into serfs. Nothing in the proposed 
judgment benefits our proper understanding of the Constitution and the 
Executive Branch's role under that document. This settlement has 
everything to do with the Government asserting control over the 
economy, eroding the rights of businessmen, and introducing regulatory 
chaos into an already volatile technology market in the naked pursuit 
of a moral fiction. In the absence of this judgment, MATRIXx would be 
given the timely death the marketplace has condemned it to. With this 
judgment, that process will simply be prolonged, as two competitors are 
coerced to waste precious talent, time and money to compete far beyond 
the point that the marketplace has deemed such an endeavor to have 
practical value.
    The Court must put a stop to the DOJ by rejecting entry of the 
proposed final judgment and dismissing the complaint with prejudice. 
The Court is well within its mandate under the Tunney Act to reject the 
proposed remedy in relationship to the violations that the United 
States alleges in its Complaint by holding the Government's definition 
of how the public interest is served by the remedy to be invalid. By 
protecting the public from gratuitous settlements that unjustly punish 
defendants, the Court would properly establish that the Tunney Act is a 
door that swings both ways. At a minimum, the Court should conduct a 
full hearing on the proposed remedy and demand the DOJ produce evidence 
placing the challenged conduct in its proper context.
    Respectfully Submitted,
    The Center for the Advancement of Capitalism

    Dated: December 19, 2002.
/S/

S.M. Oliva,
Senior Fellow.

/S/

Nicholas P. Provenzo,
Chairman.
Post Office Box 16325, Alexandria, VA 22302-8325, Telephone: (703) 625-
3296, Facsimile: (703) 997-6521, E-mail: [email protected].
[FR Doc. 03-1419 Filed 1-22-03; 8:45 am]
BILLING CODE 4410-11-M