Feeds

EU Oracle/Sun investigation could cause rift with US

Pernickety Europeans could delay deal until 2010

Designing a Defense for Mobile Applications

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.

Securing Web Applications Made Simple and Scalable

More from The Register

next story
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
MPs wave through Blighty's 'EMERGENCY' surveillance laws
Only 49 politcos voted against DRIP bill
EU's top data cops to meet Google, Microsoft et al over 'right to be forgotten'
Plan to hammer out 'coherent' guidelines. Good luck chaps!
US judge: YES, cops or feds so can slurp an ENTIRE Gmail account
Crooks don't have folders labelled 'drug records', opines NY beak
Delaware pair nabbed for getting saucy atop Mexican eatery
Burrito meets soft taco in alleged rooftop romp outrage
LightSquared backer sues FCC over spectrum shindy
Why, we might as well have been buying AIR
'Two-speed internet' storm turns FCC.gov into zero-speed website
Deadline for comments on net neutrality shake-up extended to Friday
prev story

Whitepapers

Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.