US sues Computer Associates, Platinum

WASHINGTON: The Justice Department on Friday sued Computer Associates

International Inc. for $1.3 million, alleging the company and its 1999 merger

partner Platinum Technology International Inc. illegally fixed prices by

restricting price discounts offered by Platinum before regulators approved their

deal.

The civil suit charges the erstwhile competitors of a tactic known as

"gun-jumping." Computer Associates, whose $3.5 billion acquisition of

Platinum Technology was ultimately approved, dismissed the allegations as

"unfounded" and said it would fight the charges

"vigorously." The Justice Department alleged that the merger agreement

between the two companies imposed "extraordinary conduct of business

restrictions on Platinum, preventing certain competitive activities during the

(merger review) period."

The department said that while the merger was still under investigation,

Computer Associates sent an employee to Platinum's Illinois headquarters to

review customer contracts and conduct, "other activities related to the

management of Platinum." The department is seeking a civil penalty of $1.3

million.

Computer Associates said the restrictions cited by the government were

identical to provisions in earlier Computer Associates acquisitions and insisted

the company "did not exercise beneficial ownership or operational control

over Platinum during the (regulatory) waiting period." "Those

provisions contained reasonable covenants concerning Platinum's operations,

which were needed to protect Platinum's business during the waiting period, ...

" the company said in a prepared statement. The Justice Department approved

Computer Associates' $3.5 billion acquisition of Platinum in May 1999 after the

company agreed to divest six Platinum mainframe systems management software

products.

(C) Reuters Limited 2001.