MaSSSoftech

BRUSSELS — European Union regulators on Thursday launched an antitrust probe into U.S. software maker Oracle Corp.'s takeover of Sun Microsystems Inc., saying they wanted to make sure Oracle was committed to developing Sun's rival open-source database software MySQL.

EU approval is now the main stumbling block for the US$7.4-billion deal which has already been cleared in the U.S. by the Department of Justice.

The European Commission now has 90 days — until Jan. 19, 2010 — before it makes a final decision to clear the deal or block it. It often presses companies to make changes that eliminate antitrust worries, such as selling off parts of their business.

EU Competition Commissioner Neelie Kroes said Thursday that regulators needed to examine the effect of a deal "when the world's biggest proprietary database company proposes to take over the world's leading open-source database company."
She said the EU executive wanted to check that customers won't see less choice or higher prices as a result — and was keen to make sure that open-source software continues to rival larger companies that develop their own code and don't share it with others.

EU officials said they plan to look closely at Sun's MySQL database, an open-source product that is popular among Web-based companies. They claim that MySQL will increasingly pose a threat to Oracle's market-leading database software as it adds features and attracts more customers.

EU spokesman Jonathan Todd said a key issue for regulators "is the extent to which open source software developers would be able to continue to develop products based on the open source MySQL database."

Officials also said they would examine "Oracle's incentive to further develop MySQL as an open source database" because it was important that customers are able to choose between open source and proprietary software.

"In the current economic context, all companies are looking for cost-effective IT solutions, and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions," Kroes said. "The commission has to ensure that such alternatives would continue to be available."

Todd said the EU was merely matching the U.S. in launching an in-depth investigation into the takeover. However, the EU will not join the Department of Justice in looking at other developers' access to Sun's open-source web programming language Java.

"We've looked closely at the effects on the development of Java and we don't have any competition concerns there," he said.

Todd stressed that the EU will use coming weeks to weigh up "serious doubts" about the deal — but that it could pass EU scrutiny unhindered.

"Clearly one possible outcome would be that the commission's concerns, on the basis of the in-depth investigation, would prove to be not well-founded, in which case we would be able to clear the deal," he told reporters.

The alternative — if the EU finds that its worries are justified — would be for the companies to offer remedies to soothe those concerns, such as selling off MySQL or making binding commitments so that rival developers could still base software on MySQL code.

The EU described the database market as "highly concentrated" with the three main proprietary software companies — Oracle, IBM and Microsoft — controlling some 85 per cent of the market by revenue.

Peter Alexiadis, a partner at the Brussels office of law firm Gibson, Dunn&Crutcher LLP, said he was surprised that the EU was taking a different tack from the U.S. on the deal.

"If ever there was a case for the U.S. and the EU seeing eye to eye, I would have imagined that this was an appropriate one," he said, saying he was "hard pressed" to see how the deal would strengthen Oracle's position in a global and very varied database market.

"If the commission goes down the path of defining narrow database markets, they might be going down a path they may regret," he said. "There is plenty of competition in the middleware space, and that should shut down that line of argument."

Oracle's bid for Sun marks new territory for the company, turning it into a one-stop technology shop, like IBM Corp. and Hewlett-Packard Co.

It is already expanding aggressively outside its core database software business by moving into business applications and will start making hardware if the Sun deal goes through. Sun is the world's No. 4 maker of computer servers, which power websites and corporate back offices.