The European Commission has approved under the EU merger regulation the proposed acquisition of hardware and software vendor Sun Microsystems by Oracle Corp., both based in the USA. After an in-depth examination, launched in September 2009, the commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

"I am now satisfied that competition and innovation will be preserved on all the markets concerned. Oracle's acquisition of Sun has the potential to revitalise important assets and create new and innovative products,” said Competition Commissioner Neelie Kroes

The commission's in-depth investigation, opened on 3 September 2009 assessed whether the acquisition of the world's leading open source database MySQL by Oracle, the leading proprietary database vendor, would lead to a significant impediment of effective competition within the EEA. The database market is highly concentrated with the three main proprietary database vendors – Oracle, IBM and Microsoft – accounting for approximately 85% of the market in terms of revenue.

Although Sun's share of the database market in terms of revenue is low, as users of MySQL can download and use the database for free, given its open source nature, the commission's investigation confirmed MySQL's position as the leading open source database. The commission's investigation therefore focused on the nature and extent of the competitive constraint that MySQL currently exerts on Oracle and whether this would be affected by the proposed transaction.

The commission's in-depth investigation showed that although MySQL and Oracle compete in certain parts of the database market, they are not close competitors in others, such as the high-end segment.

Given the open source nature of MySQL, the commission also assessed Oracle's ability and incentive to remove the constraint exerted by MySQL after the merger and the extent to which this constraint could, if necessary, be replaced by other actors on the database market.

The commission's investigation showed that another open source database, PostgreSQL, is considered by many database users to be a credible alternative to MySQL and could be expected to replace to some extent the competitive force currently exerted by MySQL on the database market. The EC also took into account Oracle's public announcement of 14 December 2009 of a series of pledges to customers, users and developers of MySQL concerning issues such as the continued release of future versions of MySQL under the GPL (general public license) open source license.

The commission also examined the potential impact of Oracle's acquisition of the intellectual property (IP) rights connected to the Java development platform in the context of the proposed transaction. It found that Oracle's ability to deny its competitors access to important IP rights would be limited by the functioning of the Java Community Process (JCP) which is a participative process for developing and revising Java technology specifications involving numerous other important players in the IT industry, including Oracle's competitors. The commission also found that Oracle would not have the incentives to restrict its competitors' access to the Java IP rights as this would jeopardise the gains derived from broad adoption of the Java platform and therefore the proposed transaction would raise no competition concerns in respect of the licensing of IP rights connected with Java.

Tags: Oracle, Sun, Sun Microsystems