EU opens antitrust investigations into Oracle-Sun deal

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The European Commission has opened an antitrust investigation into software maker Oracle and its planned purchase of Sun Microsystems, as the commission says it has serious worries about the deal that could see higher prices and limited choice for database software.

Oracle, the second-largest software maker, announced on April 21 of this year that it would buy Sun Microsystems and would see the combined company having both Sun’s popular technology with Oracle’s hardware assets and its other acquisitions it had made over the past years. The deal sent Sun’s shares up by nearly 37 percent.

The database market is highly concentrated, with Oracle, IBM and Microsoft controlling approximately 85 percent of the market in terms of revenue. Oracle is currently the market leader with its proprietary databases with a 48.9 percent market share, according to Gartner Research, while Sun owns the most popular open-source database MySQL.

“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,” Competition Commissioner Neelie Kroes said in a statement.

“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.”

In its preliminary market investigation, it has shown that MySQL might not have some negative effects in competition between the two databases and the market in general; and this new investigation would address a number of issues, including Oracle’s incentive to further develop MySQL as an open-source database.

“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,” Ms. Kroes said.

“The Commission has to ensure that such alternatives would continue to be available.”

Approval by the EU, via the Commission, is the final hurdle for the deal, as it was recently cleared by the US Department of Justice. The commission must make its final decision of blocking or clear the deal within 90 days (January 19, 2009).

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