The European Commission has announced its decision to open an in depth Phase II investigation, under the EC Merger Regulation, into the proposed takeover of Sun Microsystems, a US software and hardware provider, by software company Oracle.

In its initial investigation, the Commission identified serious competition concerns because the proposed transaction would merge two major competitors in the already highly concentrated market for databases. Oracle’s databases and Sun’s MySQL database compete in many of the same sectors of this market and the competitive constraint provided by MySQL is likely to increase as its functionality improves. The Commission also commented that anti-competitive effects might still exist despite the “open source” nature (which allows users access to the source code and certain other rights normally reserved for copyright holders) of Sun’s MySQL database and it was, therefore, concerned about the impact of the proposed transaction.

The Commission now has until 19 January 2010 to decide whether the merger is compatible with the common market.