U.S., EU At Odds Over Proposed Oracle Merger With Sun

WASHINGTON, November 10, 2009 – The United States and European Union antitrust regulatory bodies are at odds over whether Oracle Corporation should be allowed to go through with its proposed acquisition of Sun Microsystems.

While the U.S. has not found any issues with the proposed merger, the EU has been putting on the breaks. On Monday, the European Commission issued a statement of objections concerning the acquisition of Sun by Oracle and the deal’s potentially negative effects on competition in the database products market.

“After conducting a careful investigation of the proposed transaction between Oracle and Sun, the Department’s Antitrust Division concluded that the merger is unlikely to be anticompetitive. This conclusion was based on the particular facts of the transaction and the Division’s prior investigations in the relevant industries,” Deputy Assistant Attorney General Molly Boast of the Department of Justice’s Antitrust Division said Monday, in a statement.

“The investigation included gathering statements from a variety of industry participants and a review of the parties’ internal business documents. At this point in its process, it appears that the European Commission holds a different view. We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the Commission’s jurisdiction,” said Boast.

The U.S. Justice Department  found many open-source and proprietary database competitors and noted that “consumer harm is unlikely because customers would continue to have choices from a variety of well established and widely accepted database products.” Justice also found a large community of developers and users of Sun’s open source database who could “support a derivative version of it.”

On April 20 the companies announced that Oracle was seeking to purchase Sun’s common stock for $9.50 per share in cash with the entire transaction valued at approximately $7.4 billion. At the time Sun wrote in a release that “The Board of Directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.”

Oracle said Monday that its acquisition of Sun is “essential for competition in the high end server market, for revitalizing Sparc and Solaris and for strengthening the Java development platform.”

The company said the transaction does not threaten to reduce competition in any regard. Oracle further alleged that the EU Commission’s objections reflect a “profound misunderstanding of both database competition and open source dynamics.” The company said, “There is no basis in European law for objecting to a merger of two among eight firms selling differentiated products.”

“The two agencies certainly are working together, which is in everyone’s interest, but the cases where the two continents have diverged certainly seem to be piling up. Perhaps we need to look at the procedural fairness issues,” said Makan Delrahim, a former Deputy Assistant Attorney General for the Department of Justice Antitrust Division. “If we had some convergence on the process and the analytical mechanisms of reviewing mergers as well as general business conduct, then we can have some real discussions to see if we are on the same page on substantive antitrust law,” he said.

Delrahim added that “Tensions on this side of the Atlantic, after GE-Honeywell, Microsoft, Intel and now Oracle-Sun, certainly seem to be brewing.  Perhaps we need to reconsider whether an international code of antitrust conduct would eventually make sense.”

American Antitrust Institute President Albert Foer said “It is unusual for either the U.S. or the EU to comment on one another’s cases while they are on-going. The antitrust agencies have worked hard to establish strong collegial relationships, but it looks like efforts to reach similar conclusions on the Oracle-Sun deal were not successful and for the moment, feathers are ruffled on both sides of the ocean. I hope that calm will prevail and that the agencies will agree to disagree.”

Dow Jones reported Tuesday afternoon that the EU Commission’s objections led to the stock of Sun Microsystems dropping near its lowest levels since the Oracle acquisition was announced.