## Facts

- Cadence Design Systems, Inc., a dominant supplier of integrated circuit (IC) layout environments, proposed to acquire Cooper & Chyan Technology, Inc. (CCT).
- IC layout environments are software infrastructures through which designers use layout tools, including routing tools.
- CCT developed commercial constraint-driven, shape-based IC routing tools used to automate chip-routing functions.
- At the time, CCT was alleged to be the only firm with a commercially viable routing tool that interoperated with Cadence’s layout environment; Cadence was developing its own router but had not completed or marketed it.
- Developing commercially viable routing tools and layout environments required significant time and research and faced technical/compatibility hurdles.
- Cadence historically provided interface/compatibility information to independent tool vendors whose products complemented gaps in Cadence’s offerings, but withheld comparable interface information from developers of tools that competed directly with Cadence’s tools.
- The FTC investigated the proposed acquisition under Section 7 of the Clayton Act and Section 5 of the FTC Act, prepared a draft complaint, and resolved the matter through an administrative consent order after public comment.
- Cadence admitted jurisdictional facts, waived further procedures, waived findings and conclusions, and waived judicial review rights as part of the consent process.

## Issues

1. Whether Cadence’s acquisition of CCT may substantially lessen competition or tend to create a monopoly in markets involving IC routing tools, in violation of Section 7 of the Clayton Act.
2. Whether the acquisition and related conduct involving control over interface access could constitute an unfair method of competition under Section 5 of the FTC Act.
3. Whether behavioral conditions ensuring nondiscriminatory interoperability access could remedy the competitive risks associated with a dominant platform acquiring a key complementary routing tool.

## Decision

- The FTC accepted a consent agreement and issued a Decision and Order permitting the acquisition subject to conditions.
- The Order required Cadence to allow independent developers of commercial routing tools to participate in Cadence’s independent software interface programs on nondiscriminatory terms.
- The Order required Cadence to provide interface and technical information needed for competing routing tools to interoperate with Cadence’s layout environments.
- The Order imposed nondiscrimination obligations in administering interface programs so independent routing-tool suppliers were not unreasonably disadvantaged relative to CCT’s technology.
- The Order required Cadence to provide prior notice to the FTC before acquiring certain routing-tool firms.
- The Order included compliance reporting and enforcement mechanisms.

## Legal Principles

- A vertical or complementary merger involving a dominant platform and a key complementary product may raise Section 7 concerns if the platform owner can foreclose rivals or raise rivals’ costs by restricting interoperability inputs.
- Control over interface/compatibility information may function as a competitively significant bottleneck when access is necessary for independent suppliers to compete.
- Antitrust analysis in technology markets may focus on forward-looking effects such as reduced innovation, diminished product variety, degraded services, and higher prices arising from restricted interoperability.
- In administrative merger enforcement, the FTC may resolve competitive concerns through a consent order that imposes behavioral obligations (e.g., nondiscriminatory interface access, openness commitments) rather than blocking the transaction.
- The FTC may require transaction-specific prior-notice obligations and ongoing compliance reporting to support effective monitoring of behavioral conditions.

## Conclusion

The FTC permitted Cadence to acquire CCT through a consent order designed to prevent post-acquisition foreclosure in routing tools by mandating nondiscriminatory access to interface programs and interoperability information, supplemented by prior-notice and compliance provisions to protect competition and innovation on Cadence’s platform.


In re Cadence Design Sys., Inc., 124 F.T.C. 131 (1997)