EU Oracle/Sun investigation could cause rift with US
Pernickety Europeans could delay deal until 2010
The European Commission's decision to investigate Oracle's purchase of Sun Microsystems under competition rules could lead to a major rift with US authorities, a competition law expert has warned.
Alan Davis, a competition law expert at Pinsent Masons, the law firm behind OUT-LAW.COM, has warned of a repeat of a clash between EU and US authorities over the legality of a merger in 2001. He said he was surprised that the European Commission was conducting an in-depth investigation when the US competition authorities had already cleared the deal.
"The risk is that there might be a repeat of what happened in 2001 when the Commission blocked the General Electric merger with Honeywell after it had already been cleared in the US, leading to a major disagreement between the US and EU authorities," he said. "The establishment of the International Competition Network (ICN) was supposed to try and encourage greater convergence between competition authorities around the world when looking at international mergers in global markets such as this one."
Database and software company Oracle agreed a $7.4 billion takeover of Sun in April. Sun makes software and hardware, including the open source MySQL database software.
The Commission said today that after a preliminary investigation it had found enough to indicate that it would break European Union competition law to merit an in depth probe. It said it had "serious doubts" about the merger.
The investigation will delay the deal until at least 2010.
"The Commission’s initial market investigation indicated that the proposed acquisition would raise serious doubts as to its compatibility with the Single Market because of competition concerns on the market for databases," said a Commission statement.
"The Commission now has 90 working days, until 19 January 2010, to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area (EEA) or a substantial part of it," it said.
The Commission said that its primary concern was the database market, which it said was already highly concentrated, with 85% of the market controlled by the three leading sellers of software Oracle, IBM and Microsoft. Though not one of the top three sellers, Sun's MySQL is the leading open source piece of database software.
"The proposed transaction would bring together two major competitors in the market for databases," said the Commission. "The Commission’s preliminary market investigation has shown that the Oracle databases and Sun's MySQL compete directly in many sectors of the database market and that MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional."
"The Commission's investigation has also shown that the open source nature of Sun's MySQL might not eliminate fully the potential for anti-competitive effects. In its in-depth investigation, the Commission will therefore address a number of issues, including Oracle's incentive to further develop MySQL as an open source database," it said.
The Commission has shown itself increasingly willing to intervene on competition grounds in the technology industry, even when the companies being regulated are US firms.
"The Commission has a reputation for being much tougher on the technology sector than the US antitrust authorities. It has imposed record fines on Intel and Microsoft for abusing their dominant positions," said Davis.
"An interesting aspect is that the Commission does not seem to be concerned about Oracle gaining control over the programming language Java, and its licensing terms, as this came up as a issue in the US investigation and delayed clearance being given," he said.
"The Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover," said EU Competition Commissioner Neelie Kroes. "Databases are a key element of company IT systems. 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. The Commission has to ensure that such alternatives would continue to be available."
Copyright © 2009, OUT-LAW.com
OUT-LAW.COM is part of international law firm Pinsent Masons.
@ Fazal Majid
"Quite a few companies use MySQL as an embedded database and cannot use a GPL-licensed version because that would force them to release their own source code. Any fork of MySQL can only ever be GPL unless Oracle agrees to relicense MySQL"
Your journey to understand Open Source, GPL etc. is perhaps too long, if not impossible, wish you luck, however . Perhaps the name and the text is just a joke.
I do not want to be rude (if you are a real person) but it is like it bothers you that it is hard to steal something lawfully.
SPARC is dead, ROCK is history, SPARC64 is Fujitsu tech
just kill sparc and get it over with.....we only use xeon and power....all sparc servers that come up for refresh get migrated.
@Ted Treen and others
Sure - both Oracle and Sun are perfectly free to cease all business in the EU, so they won't need any authorization to merge from the EC.
To people sho are complaining now: get over it or get ready to feel bad, bad, bad when China and India will be wanting to have their say as well.
I feel sorry for Sun employees, though. I know many of them, I know it's not funny for them, and I do wish it would be easier.