The European Commission has formally objected to Oracle's planned acquisition of Sun saying the deal would harm competition in the database market.
Oracle responded that it would "vigorously oppose" the Commission, saying its position reflects "a profound misunderstanding of both database competition and open source dynamics." The US Department of Justice, which has already approved the deal, also weighed in, saying it studied the deal carefully and concluded that it is "unlikely to be anticompetitive."
The statement of objections was rumoured to be imminent last week, and follows the Commission's decision in September to launch an in-depth probe of Oracle's planned Sun acquisition. It is a procedural step in European antitrust investigations that paves the way for Oracle to make a formal response.
"The Statement of Objections sets out the Commission's preliminary assessment regarding, and is limited to, the combination of Sun's open source MySQL database product with Oracle's enterprise database products and its potential negative effects on competition in the market for database products," Sun said in a regulatory filing with the US Securities and Exchange Commission.
The statement of objections is "a preparatory document" and does not necessarily mean the Commission will block the merger, Sun said. It also noted that any final decision can be appealed.
The text of the Commission's objections to Oracle was not released publicly. The Commission is supposed to issue a ruling on the matter by 19 January.
In a foretaste of the arguments it will present to the Commission, Oracle asserted in a statement that the deal "does not threaten to reduce competition in the slightest, including in the database market."
"It is well understood by those knowledgeable about open source software that because MySQL is open source, it cannot be controlled by anyone. That is the whole point of open source," Oracle said.
It characterised the database market as "intensely competitive with at least eight strong players, including IBM, Microsoft, Sybase and three distinct open source vendors."
It also argued that the deal is "essential for competition" in the high-end server market because it would revitalise Sun's Sparc processor and Solaris OS platforms. It would also strengthen the Java development platform, according to Oracle.
"Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction," the company said.
Oracle is no stranger to antitrust investigations. The US Department of Justice tried to block Oracle's acquisition of PeopleSoft on the grounds that it would unacceptably contract the enterprise software applications market to two large players, Oracle and SAP.
Oracle won that case in 2004, by convincing US District Court Judge Vaughn Walker that there were many other competitors in that market, albeit smaller ones.
The DOJ issued its own statement explaining its decision to approve the Sun-Oracle deal. It said there are "many open-source and proprietary database competitors" and that there is a large community of open-source developers with expertise in maintaining and improving Sun's open-source software.
"At this point in its process, it appears that the EC holds a different view," the DOJ said. "We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the Commission's jurisdiction."
Oracle CEO Larry Ellison has said that Sun is losing $100 million per month as it waits for the deal to close.
On Friday Sun released its financial results for the last quarter, ended Sept. 27. Revenue was $2.24 billion, down from $2.99 billion a year earlier. Its losses narrowed to $120 million, from $1.68 billion in the same quarter last year, thanks largely to cost-cutting efforts.