September 4, 2009
BRUSSELS — European regulators delayed the proposed takeover of Sun Microsystems by the software company Oracle on Thursday, indicating that the combination could squelch the growth of a popular, free corporate database program owned by Sun.
The decision by the European Commission to extend its investigation into the deal, worth $7.4 billion, is especially sensitive because the Justice Department has already approved the merger. Regulators in the United States questioned Oracle’s market power in some areas of its business but raised fewer concerns than the Europeans about open-source software.
The European Commission’s assertiveness has conflicted in the past with the Justice Department’s judgment. It has objected to mergers of American companies on several occasions, but in 2003, it outright rejected the merger of General Electric and Honeywell after the American authorities approved it. Mario Monti, competition commissioner at the time, said that G.E. would become too dominant in markets for aircraft engines.
In recent years, Mr. Monti and Neelie Kroes, the current European Union competition commissioner, have found themselves at odds with some of their American counterparts over whether to force Microsoft to change its Windows operating system.
American and European antitrust officials, legal experts say, agree far more often than they differ, other than in a handful of cases. “But there are somewhat different sensitivities,” noted Andrew I. Gavil, a law professor at Howard University. “Even after the change in administrations in Washington, the American level of concern about postmerger price increases tends to be less than in Europe. And European antitrust officials are more protective of consumers and more confident of the beneficial consequences of intervention.”
Samuel R. Miller, a partner at Sidley Austin in San Francisco who acted as special trial counsel for the Justice Department’s first antitrust case against Microsoft, said, “This action reflects a continued pattern of aggressive antitrust enforcement regardless of whether the companies are based in Europe, the U.S. or Asia.”
Oracle has tussled with European Union regulators in the past over its ambitions but has overcome initial opposition. In 2004, the commission approved Oracle’s acquisition of PeopleSoft without conditions after subjecting the deal to the kind of in-depth inquiry now under way over its purchase of Sun. The Justice Department had opposed that merger, but lost in a legal battle with Oracle. The following year the European commission also approved Oracle’s acquisition of Siebel Systems, again without conditions.
In announcing the decision Thursday, Ms. Kroes warned that the acquisition could hamper development of an important software product owned by Sun, which specializes in computer hardware. The product, MySQL, is the most widely used corporate database software in the world, and it competes with software produced by Oracle.
Ms. Kroes said preserving access to open-source software was vital when much of the world, including Europe, might just be emerging from a deep slump.
“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. She said a longer investigation was needed “to ensure that such alternatives would continue to be available.”
Oracle had no comment on the action.
The commission has at least three months, or until Jan. 19, to decide whether to clear the deal or issue an order blocking it.
European and American antitrust authorities have sought to narrow their differences in recent years in an effort to avoid disputes that have marred trans-Atlantic relations this decade.
Antitrust experts said the decision to investigate the effects on open-source software of Oracle’s acquisition of Sun showed that differences persisted between American and European regulators.
“Europeans still have a lot more concerns than Americans about companies using strong or dominant positions to create bottlenecks for competitors in the information and technology sectors,” said Peter Alexiadis, a partner at the law firm Gibson, Dunn & Crutcher who is based in Brussels.
“Any whiff of dominance over different platforms used to deliver information raises particular concerns,” he said. “This may in part explain why Europeans, who are used to multiple business traditions, might be less inclined to view Oracle’s traditional strengths in databases as not posing competitive concerns.”
Mr. Alexiadis also noted that a German company, SAP, was an example of a European software company that fiercely competes with Oracle on a number of relevant markets affected by the deal.
In the beginning, writers of open-source software did not see it as a source of profit. More recently, companies with open-source operations have begun making large amounts of money on those products by providing support services to go along with them. That bundle of software and service is still often priced at a discount to software sold by companies like Oracle.
A major concern cited by European investigators was what would happen to MySQL once Oracle took it over.
They expressed concern that Oracle would have an incentive to stymie the development of MySQL as a way of improving the sales of its competing database products.
Some experts said the concerns of Ms. Kroes were probably unfounded.
Bo Lykkegaard, an analyst with IDC in Copenhagen, said Oracle had bought Sun for a variety of reasons and that MySQL was not among Oracle’s priorities.
Even so, Mr. Lykkegaard said that Oracle, by keeping MySQL’s open-source status, would be able to develop parts of its business by reaching out to small companies or departments within large companies that were seeking value-priced software for running operations that were not necessarily “mission critical.”
Another issue that may have led the Europeans to take more time with the case is the way that Oracle has handled regulators on both sides of the Atlantic.
Oracle notified European Union regulators of its deal in late July, more than two months after it informed American officials.
European merger watchdogs can take a dim view if companies spread out their notifications between jurisdictions over long periods of time, and they have said in the past that such tactics might be aimed at pressuring the Europeans to give the green light to takeovers already approved in the United States.
Read on NY Times
Posts
