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Oracle’s battle with European regulators over its acquisition of Sun Microsystems boils down to a conflict about the importance of free software and the government’s role in protecting it.
The verbal salvos heated up this week after the European Union issued formal objections on Monday to a bid by Oracle, the giant software maker, to buy Sun for $7.4 billion.
Oracle immediately pilloried the objections, saying they were based on “a profound misunderstanding” of the software market.
On Tuesday, the European Union struck back, with a spokesman for the union’s competition commissioner, Neelie Kroes, dismissing Oracle’s criticism as “facile and superficial.”
At one level, the sharp exchanges fit a familiar pattern in antitrust disputes between Brussels and American technology companies, including Microsoft and Intel. The Americans tend to portray the European authorities as technically clueless bureaucrats, while the Europeans cast the big American businesses as arrogant bullies.
But the Oracle case also reflects very different views of open-source software by antitrust officials in the United States and Europe. The European regulators want Oracle to sell off a unit of Sun that manages the most popular open-source database program, MySQL. Like all open-source products, MySQL code is distributed free, and the company tries to make money by charging corporate customers for technical support and extra features.
The European antitrust officials fear that Oracle, the largest maker of proprietary database software, will have little incentive to sustain and invest in MySQL, a potential rival.
The United States Justice Department does not share the European concerns. After the Brussels decision on Monday, the American antitrust regulators made an unusual statement, saying that it had concluded there was a “large community of developers and users of Sun’s open-source database” who would likely keep maintaining and improving MySQL regardless of Oracle’s future decisions about the product.
Michael A. Cusumano, a professor at the Sloan School of Management at Massachusetts Institute of Technology, said the trans-Atlantic “megawar” over open-source software was not surprising.
“It makes sense that the Europeans come to the defense of open-source companies because the big proprietary companies are nearly all American,” he said. (The exception is SAP, the large German maker of business management software.)
European governments have long viewed open-source software as a potential tool of economic development and independence.
The vision was laid out nine years ago in a report by a technology advisory group to the European Commission. Open-source software, the report concluded, presented “a great opportunity” for the region that could perhaps “change the rules in the information technology industry,” wresting the lead in software from the United States and reducing Europe’s reliance on imports.
Several European countries have policies that encourage government agencies and municipalities to consider open-source software like MySQL and Linux, an alternative to the Windows operating system from Microsoft.
The wider economic role of open-source software, legal experts say, appears to have figured into the thinking of Europe’s antitrust regulators.
“There is a greater sensitivity to the importance of open-source software in Europe,” said Andrew I. Gavil, a law professor at Howard University. “They value the competition from open-source software and the need to support that competition more than in the United States.”
Dennis Oswell, an antitrust lawyer with the firm Oswell & Vahida in Brussels, said the move against Oracle also reflected a greater willingness by European regulators to move against potential threats to competition before there is evidence of harm.
“The Europeans are keen to police markets prospectively even lightning-quick ones like technology to ensure effective competition in the future,” Mr. Oswell said. By contrast, he said, American regulators “see low prices and competitive markets today and say, ‘O.K., let’s not worry too much about what might or might not happen tomorrow.’ ”
The review of the Oracle-Sun deal proceeded on different timetables in the United States and Europe, though the investigators did make some joint calls on Sun and Oracle customers as part of their inquiries.
After the acquisition plan was announced in April, the investigation by both sets of regulators focused mainly on Java, a widely used programming language and Internet technology created by Sun, according to a person close to Oracle, who asked not to be named because he was not authorized to speak for the company.
By August, the person said, the focus of Europe’s investigation had switched to MySQL, which took Oracle somewhat by surprise. The European authorities asked Oracle to divest MySQL, and Oracle resisted.
Ms. Kroes first publicly raised concerns about MySQL in September two weeks after the Justice Department’s antitrust division had approved the Oracle-Sun deal. She said at the time that nurturing open-source software was vital when the world was emerging from an economic slump.
Ms. Kroes met last month with Safra A. Catz, Oracle’s president, but made no progress. Oracle’s stance was that MySQL and Oracle database products rarely competed head on. MySQL is a fast, lightweight database, used mainly in software applications for the Web. Oracle’s database, by contrast, is a heavier program intended for running more mainstream corporate applications like sales management.
“Europe is absolutely right that there is a competition problem in enterprise and database software markets, but MySQL doesn’t actually compete with Oracle,” said Roger Burkhardt, chief executive of Ingres, an open-source database company that does compete directly with Oracle in the corporate market.
MySQL, the person close to Oracle said, is more naturally a competitor to Microsoft’s database software, SQL Server. And Oracle has every reason to keep investing in MySQL to challenge Microsoft, the person said. A public hearing in the Oracle case is scheduled in Brussels for Nov. 25. The European Union’s ruling is due on Jan. 19.
The European setback is a new and uncomfortable experience for Oracle and its chief executive, Lawrence J. Ellison.
His company has had two previous deals cleared in Europe without conditions: Oracle’s acquisition of PeopleSoft in 2004, and its purchase of Siebel Systems a year later. Both were makers of proprietary business software.
Steve Lohr contributed reporting from New York.
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