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US Senators Go to Bat for Oracle, Sun Merger

US Senators Go to Bat for Oracle, Sun Merger

The European Commission's hesitation over Oracle's acquisition of Sun Microsystems has prompted 59 U.S. senators to weigh in on the matter, urging the EC to allow the deal to proceed. The DoJ has already taken a similar step. How the Europeans will respond to this additional pressure from U.S. politicians is questionable.

By Erika Morphy E-Commerce Times ECT News Network
11/25/09 11:41 AM PT

Fifty-nine U.S. senators are asking European antitrust regulators to conclude their review of the Oracle acquisition of Sun Microsystems. The move, led by Sen. John Kerry, D-Mass., and Sen. Orrin Hatch, R-Utah, is an unusual one for the U.S. legislative body.

It follows a similar action by the Department of Justice, which also urged the Commission to wrap up the investigation. Whether this growing pressure from the U.S. will have the desired effect, however, is debatable.

Earlier this month, the Commission issued a formal statement of objections to the proposed US$7.4 billion deal, based on a perceived threat to competition -- namely, that Oracle ownership of Sun's open source MySQL database software might represent unacceptable consolidation in the database space.

The Justice Department, which approved the deal this summer, has asked the Commission to consider the variety of choices customers would still have after an Oracle-Sun merger.

Mounting Concerns

It was never expected that the European Commission would rubber-stamp the acquisition; however, the issuance of a formal statement of objections was worrisome to proponents of the deal, as it signaled the start of a process that could end with the EC requiring a divestiture of MySQL as a condition of going forward with the deal.

That could explain why the Senate is ratcheting up the pressure.

"The EC is within its sovereign rights to set the rules for operation in its market, but with our Department of Justice having made a compelling case that the merger does not pose a threat to competition, it is fair to ask the EC for the basis on which a delay on decision making is warranted and to make a decision one way or the other," Kerry said in a statement.

"Some have raised concerns over the company's ability to continue to employ its thousands of workers," reads a letter signed by the 59 senators and addressed to Charge d'Affaires Angelos Pangratis, acting head of the delegation of the European Commission to the United States.

"Accordingly, we respectfully request the European Commission complete its investigation of this transaction as quickly as possible," the letter concludes.

Different Approach

It's unusual for 59 senators to agree on competition policy, Ryan Radia, an analyst with the Competitive Enterprise Institute, told the E-Commerce Times.

Still, it is impossible to predict what impact -- positive or negative -- this showing will have on the Commission, he said. "It probably won't be a huge one. The European Commission takes a different approach to competitive policy than the U.S. does. It is very focused on the impact an acquisition would have on its competitors. In this case, they have expressed clear concern that the acquisition would result in fewer players in the MySQL database market."

Unlike American antitrust regulators, which consider a merger's market effect, or lack thereof, the EU views large companies as suspect per se, necessitating full review -- and frequently resulting in disapprovals, Raymond Van Dyke, partner with Merchant & Gould, told the E-Commerce Times.

For that reason, the merger will remain in limbo for a while longer, he predicted -- despite Sun Microsystems' $100 million-a-month estimated revenue losses as the deal pends.

That said, the Commission is by no means insulated from politics, noted Competitive Enterprise's Radia, and "it is possible that the letter may nudge them in the direction of approving the deal."

Image Problems

It is also possible that the letter could backfire for the U.S. companies, Axis Technology President Mike Logan told the E-Commerce Times.

Most countries react strongly to the perception that they are being strong-armed by the U.S., even in business matters. The U.S. image abroad was damaged by the perception that it played a major role in creating the global recession, Logan said.

Oracle was unable to respond to the E-Commerce Times' request for comment in time for publication.


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