The European Commission opened an in-depth investigation into Oracle's planned $7.4 billion takeover of Sun Microsystems Thursday, citing "serious concerns" about the deal's effect on competition in the market for databases.
Europe's top competition authority called for a closer look at the deal after conducting a routine month-long examination. 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," said Competition Commissioner Neelie Kroes in a statement. Sun competes against Oracle, among others, with its open source database, MySQL.
The Commission's job in the extended investigation "is to ensure that customers would not face reduced choice or higher prices as a result of this takeover," she said.
The database market is highly concentrated with the three main competitors of proprietary databases -- Oracle, IBM and Microsoft -- controlling roughly 85 percent of the market in terms of revenue, the Commission said in a statement. Oracle is the market leader in proprietary databases, while Sun's MySQL database product is the leading open source database. The Oracle databases and Sun's MySQL "compete directly in many sectors of the database market and MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional," the Commission said.
The Commission said that during its initial probe it found 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," the Commission said.
Earlier this week Sun reported a 31 percent drop in sales during the quarter running from April to June, compared with sales during the same period in 2008. Operating loss for the quarter was $218m, compared with an operating profit of $63m a year earlier.