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In the Matter of Cadence Design Systems, Inc.

124 F.T.C. 131 (1997)

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In the Matter of Cadence Design Systems, Inc.

Federal Trade Commission

124 F.T.C. 131 (1997)

Facts

Cadence Design Systems, Inc. (Cadence) (defendant) made integrated circuit-layout environments and related circuit-layout tools and wanted to acquire CCT, a company that made circuit-layout routing tools. Integrated circuit-layout environments are software infrastructures in which circuit designers access integrated circuit-layout tools, including routing tools. Cadence was the dominant supplier of circuit-layout environments, and CCT was the only firm with a commercially viable routing tool. Cadence was working on a routing tool, but it was not yet finished or on the market. There were many barriers to entry in the circuit-routing tool and environment markets, including that it typically took several years to develop commercially viable products. Historically, Cadence provided information about its circuit-layout environment to companies making layout tools Cadence did not offer so that customers could buy a full set of compatible products. Cadence did not share similar information with companies making tools competing with Cadence’s current offering of tools. The Federal Trade Commission (FTC) (plaintiff) filed a complaint against Cadence, arguing that the proposed vertical merger with CCT was anticompetitive because Cadence would be less likely to grant access to its circuit-layout environment to potential competitors after the merger. After the merger, Cadence would have a full set of products on offer and hold a leading share in both the circuit environment and tool markets, disincentivizing Cadence to share compatibility information. As a result, the FTC argued that the proposed merger would increase the chance that successful entry into the routing-tool market would also require entry into the layout-environment market, making it less likely that new competitors would enter the tool market due to the high barriers to entry. The merger would therefore lessen competition. The parties agreed to a consent order approving the merger subject to several conditions, including that Cadence would continue to provide compatibility information to competing circuit-tool companies and notify the FTC before acquiring another circuit-routing tool company.

Rule of Law

Issue

Holding and Reasoning (Pitofsky, J.)

Concurrence/Dissent (Azcuenaga, J.)

Dissent (Starek, J.)

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