Updated The proposed $7.4bn dollar merger takeover of Sun by Oracle is facing a full competition investigation by the European Commission.
Competition Commissioner 'Steelie' 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. 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.
The Commission described the database market as highly concentrated, with just three companies - IBM, Microsoft and Oracle - controlling 85 per cent of the market in revenue terms.
An initial investigation by competition regulators found sufficient overlap between Sun's MySQL and Oracle's products already. Furthermore the Commission expects MySQL to extend further into Oracle's market as its functionality improves.
Part of the investigation will be into "Oracle's incentive to further develop MySQL as an open source database".
The Commission investigation will not necessarily only lead to a refusal to block the deal. They could impose behavioural or structural remedies - force the merged company to sell off some of its businesses or impose restrictions on how it behaves.
Oracle's proposed acquisition has been approved by the US Department of Justice, although the DoJ had initially raised concern over licensing of Java.
A bullish Oracle attorney at the time dismissed the notion that concern over something as piffling as Java licensing might delay or derail the mighty deal, stressing its cordial dealings with the DoJ.
Counsel Dan Wall said Oracle has "a very good dialogue" with the DoJ and called licensing of Java "one narrow issue" "that is never going to get in the way of the deal."
"I fully expect that the investigation will end soon and not delay the closing of the deal this summer," he said.
With Wall's summer closure now in full retreat, Oracle responded to the Commission Thursday in a statement that took a decidedly less bullish tone.
Oracle stuck simply to the facts, saying the Commission had decided to seek more information by conducting a phase-two inquiry."Closing of the transaction is subject to certain conditions, including clearance by the European Commission," Oracle said soberly.
The giant re-iterated the deal has already been approved by the DoJ and Sun's stock holders.®
This article has been updated to include the statement by Oracle.