Commission clears Oracle’s acquisition of Sun Microsystems

On 21 January 2010, the Commission approved Oracle’s acquisition of Sun Microsystems after an in-depth investigation launched last 3 September 2009 (See Newsletter 6/2009 p. 13 for background). The Commission has now concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. In fact, (former) Competition Commissioner Neelie Kroes stated that “Oracle’s acquisition of Sun has the potential to revitalize important assets and create new and innovative products.”

Sun provides network computing infrastructure solutions that include computer systems, software, storage and services. In 2008, Sun acquired the open source database, MySQL.

The Commission’s main concern was whether the acquisition of the world’s leading open source database Sun’s MySQL by Oracle, the leading proprietary database vendor, would lead to a significant impediment of effective competition within the EEA. This concern was based on the premise that 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. In this context, the Commission’s investigation confirmed MySQL’s position as the leading open source database, despite Sun’s low share of the database market in terms of revenue (due to the fact that users of MySQL can download and use the database for free, given its open source nature).

Accordingly, the in-depth investigation focused on the nature and extent of the competitive constraint that MySQL exerted on Oracle and whether this would be affected by the proposed acquisition.  In this respect, the Commission’s investigation showed that MySQL and Oracle are not close competitors in parts of the database market, such as the high-end segment.

The Commission further found that after the merger, PostgreSQL, another open source database, could be expected to replace to some extent the competitive force currently exerted by MySQL on the database market. In addition, other new products created from the MySQL code base (so called “forks”) which continue to be compatible with the core MySQL Server release might also develop in future, thereby exercising a competitive constraint on Oracle in a sufficient and timely manner.

The Commission has also taken into account Oracle’s public undertaking 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 open source license. Third parties will be allowed to continue to develop storage engines to be integrated with MySQL and to extend the functionality of MySQL.

The Commission also excluded that Oracle would have the ability and the incentive to deny its competitors access to important intellectual property rights connected to the Java development platform. This conclusion was based on the functioning of the Java Community Process (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), and the fact that a restriction of its competitors’ access to the Java IP rights would jeopardize the gains derived from broad adoption of the Java platform.

Finally, the Commission also concluded that no competition concerns would arise on the market for middleware and in the “IT stack” in the light of the merged entity’s market shares and prevailing competition in the markets. [Gabriele Accardo]