European Commission concerns over Oracle's takeover of Sun - Update

The European Commission has launched an in-depth investigation of Oracle's planned takeover of Sun Microsystems. According to a press release, preliminary investigations have indicated that there may be competition problems in the database market. The investigation now has to decide by 19th January 2010 whether the merger will seriously hamper effective competition.

European Commission competition commissioner Neelie Kroes said, "The Commission has to examine very carefully the effects on competition in Europe when the world's leading proprietary database company proposes to take over the world's leading open source database company. In particular, the Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover." Since open source-based systems increasingly represent an economic alternative to proprietary software for businesses, the commission must, in Kroes' opinion, ensure that such alternatives remain available.

In response, a statement from Oracle accuses the European Commission of misunderstanding the state of competition on the database market and "open source dynamics". The statement claims that, since MySQL, which Oracle will acquire as part of Sun, is open source, it cannot be controlled by any one entity. Oracle and MySQL are, according to the statement, very different database products, for which reason it sees no legal basis for the European Commission to cast doubt on the merger, particularly as there is, it continues, intense competition from a total of eight companies in the database market.

The statement adds, that following the European Commission initiating a second phase review of the planned takeover, the US Justice Department also took a second look at it and again raised no objections to the deal after specifically looking at the takeover of MySQL. The company has announced that it intends to "vigorously oppose" the European Commission's objections, and is confident of its chances in view of the "overwhelming" evidence.

The European Commission's position is backed by MySQL founder Michael "Monty" Widenius, who last week gave an interview in which he made clear that he considers Oracle the main competitor for MySQL. Former MySQL advisor and shareholder Florian Müller takes a similar line and adds that open source is a distribution method, but that MySQL depends on having a company behind it which generates income from IP rights to finance further development. "Why would Sun have paid $1 billion for something that can be forked?", asked Müller. "Why doesn't Oracle just close the Sun deal quickly without MySQL and fork it if it's all that easy to do and it doesn't matter who owns the assets?"

Update: Sun has now confirmed, in a Form 8-K filing with the US Securities and Exchange Commission, that the European Commission's concerns are limited to the issue of Oracle's database products and Sun's MySQL database products and the potential negative effects on competition in the database market.

(djwm)