Wikileaks cables shows Obama Administration role in lobbying EU to approve Oracle acquisition of MySQL and other Sun assets

Posted on by James Love

Two cables recently disclosed by Wikileaks illustrate the degree to which the Obama Administration was monitoring the EU review of the Oracle acquisition of Sun, and leaning on the European Union to permit Oracle to acquire MySQL and other “open source” assets controlled by Sun.

Both cables were signed by Ambassador Christopher W. Murray, who served as Deputy Chief of Mission and Chargé d’Affaires at the United States Mission to the European Union, in Brussels, Belgium, from 2007 to 2010.

The first is an incomplete cable, dated October 27, 2009, which describes Oracle’s concerns about the EU review of the merger.

Oracle Concerned Over Eu Investigation Of Sun Merger
http://cablegatesearch.net/cable.php?id=09BRUSSELS1455&q=mysql

October 27, 2009

UNCLAS SECTION 01 OF 02 BRUSSELS 001455 SENSITIVE SIPDIS NOT FOR INTERNET DISTRIBUTION DOJ FOR CALDWELL HARROP STATE PASS TO FTC FOR JOHN PARISI DOC FOR DAVID DEFALCO STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA PLEASE PASS TO USTR – DAVID WEINER

¶1. (SBU) SUMMARY. Oracle visited USEU October 21 over concerns that its $7.4 billion plan to acquire Sun Microsystems is at risk of being blocked by the European Commission. The merger, approved by USDOJ in August, is under review by the Commission. USDOJ is coordinating closely with the Commission to try to prevent a divergent outcome in this matter. Oracle expects the Commission to issue a Statement of Objections shortly. A Statement of Objections is a normal part of a Commission merger review, and the Commission has until January 19 to approve or prohibit the merger. Oracle says it is unwilling or unable to make certain divestitures to satisfy the Commission’s concerns, and that merger failure will cause Sun to go bankrupt. Sun announced October 20 that it is cutting 3000 jobs over the next year, as a result of delays in receiving merger clearance from the Commission. END SUMMARY.

EUROPEAN COMMISSION’S ORACLE-SUN MERGER REVIEW ——————————————— –

¶2. (SBU) Oracle President Safra Catz met the week of October 20 with European Union Competition Commissioner Neelie Kroes to discuss the company’s concerns over the Commission’s review of the proposed $7.4 billion Oracle – Sun merger. Oracle also visited the U.S. Mission October 21 to urge the U.S. to push for rapid European Commission approval of the merger.

¶3. (SBU) The Oracle-Sun merger, announced last spring, was approved by the U.S. Justice Department (DOJ) in August. The Commission opened a second phase investigation of the merger in September. The Commission is concerned that Oracle will hamper development of MySQL, an open-source database that competes with Oracle and with products of several other firms, such as Microsoft and IBM. DOJ investigated this aspect of the transaction during its own review and concluded otherwise.

¶4. (SBU) Oracle said that the DG COMP case team told the company to expect a formal “Statement of Objections” (formal charge of violation of EU competition law) soon. If a Statement of Objections (SO) is issued, Oracle and Sun will then have the right to an oral hearing to defend the merger. The Commission has until January 19 to issue a final decision approving or blocking the merger. Commission phase II proceedings historically result in merger prohibitions only about 10 percent of the time, but around half of cases are cleared subject to conditions such as divestitures. A Statement of Objections is a normal step in many of these cases, which often results in intensified negotiations.

¶5. (SBU) Oracle stated that the Commission is pressuring it to divest MySQL as a condition for approval of the merger. Oracle claims such a divestiture will destroy the merger for two reasons: 1) Oracle’s business case for the merger depends on keeping MySQL to make the merger economically viable, since Oracle plans to expand the market for MySQL and its associated support contracts; and (2) Oracle would be forced to take a huge accounting loss if it sold MySQL, since it believes that Sun overpaid in paying nearly $1 billion for MySQL in 2008, and it would only be able to sell it for a fraction of this sum.

[ Paragraphs 6 to 8 of the cable appear to be incomplete and full of errors…]

6hber 20 that it is cuttiext year, blaming the dapproval of the merger. thp@ r@n expects action fro to merger approval, suggQdepends on Oracle produci that there were noproposal for a remedy rns identified by the viewpoint as presented Qeen forthcoming with BRUSSELS 00001455 002.2 OF 002 the Commission and that it has disproved the Commission contention that significant competition problems exist. While this may appear to be a standoff, additional discussions between the company and DG COMP seem to be underway. ]

¶9. (SBU) DOJ/Antitrust views this matter as a high priority. Its senior officials and investigative staff are currently engaging productively and intensely with their DG COMP counterparts, and are in close touch with Oracle and Sun, in the hopes of preventing a divergent outcome. END COMMENT.

¶10. (U) This cable has been cleared by USDOJ’s antitrust division. MURRAY

The second is a November 25, 2009 cable that was sent to Secretary of State Clinton, USTR, the National Security Council, the Departments of Treasury, Justice and Commercial, as well as the Federal Trade Commission.

http://cablegatesearch.net/cable.php?id=09BRUSSELS1591&q=mysql

Subject Kroes Cabinet Chef On Oracle-sun, Banking Reviews, Next Commission Dynamics
November 25, 2009
Origin USEU Brussels (Europe)

TO:
RUEHC/SECSTATE WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE RUCNMEU/EU INTEREST COLLECTIVE
DOJ FOR CALDWELL HARROP
DOC FOR DAVID DEFALCO
USTR FOR DAVID WEINER
FTC FOr J. PARISI

¶1. (SBU) Anthony Whelan, chef du cabinet to Competition Commissioner Neelie Kroes, told USEU November 20 that Kroes and DG COMP are carefully reviewing the complex arguments involved in the Oracle-Sun merger, and the potential concerns over Oracle’s acquisition of Sun’s MySQL open source database. Key issues Kroes is reviewing include whether: MySQL’s open source nature protects it from competition concerns (Kroes is skeptical); DG COMP concerns that Oracle wouldn’t support developing MySQL into a stronger competitor to other existing lower-end databases; and interest in Oracle arguments that MySQL technically cannot be scaled up far enough to compete with some of these databases. He noted that Kroes and DG COMP officials’ minds “are more open” to Oracle/Sun arguments than they would be in many SO cases, given the new open source issues involved.

ORACLE-SUN MERGER —————–

¶7. (SBU) After discussing state aids and Commission politics (below), Whelan turned to the Commission’s investigation of the planned $7.4 billion Oracle-Sun merger. He said Oracle had requested an 8-day extension to prepare their written and possible oral responses to the Commission’s Statement of Objections (SO). This is a positive sign, he said, that they are taking the Commission process seriously. He said that some on the DG COMP case team felt Oracle had been “lazy” in its responses to requests for information, but agreed Oracle may not have expected the database concerns, since the early focus had been on potential JAVA issues. He said concerns about Sun’s MySQL open source database were brought to DG COMP by questionnaire responses from other parties over the summer.

¶8. (SBU) Whelan acknowledged that Sun and Oracle are concerned that the issuance of an SO is a serious step, since very few mergers with SOs have been cleared unconditionally, but added that each case is totally different and that Oracle-Sun presents new issues for DG COMP in involving open source software models so extensively.

¶9. (SBU) Whelan understands Oracle’s existing databases and MySQL have different architecture and target different markets. He noted that Kroes and DG COMP know the argument that open source software is by definition “pro-competitive,” since the theory is that everyone has access to it and can contribute to improving open source programs, but said the Commission is examining subtle and complex counterarguments to this. He said that in the dynamic, real marketplace in Europe, this open source argument needs to be examined.

¶10. (SBU) Key questions DG COMP is considering in this case, Whelan said, include: 1) whether the “global public license” open source nature of MySQL somehow precludes potential competitors from using it to develop commercial products that could eventually compete with OracleQs databases; 2) in this connection, Oracle’s assertions that technically MySQL cannot be scaled up to compete on Oracle’s high end; and 3) whether Oracle has the incentive to support development of MySQL into a stronger program.

¶11. (SBU) These concerns, Whelan said, are to some extent hypothetical, but then added that the Commission’s merger control powers differ from those BRUSSELS 00001591 003.7 OF 003 held by DOJ and FTC in the U.S. In the U.S., he said, agencies can come back to a merger after it occurs, see the results, and take structural action if necessary. The Commission doesn’t have that possibility, he continued. The Commission faces an incredibly high bar for subsequent action, he said (if it can show an Article 82 violation that can’t be fixed by a behavioral remedy); hence the need for a thorough review now.

¶12. (SBU) Whelan continued musing about whether the specific type of open source license MySQL has works well in practice; he noted that the most successful open source products often have a commercial sponsor, (ex. Red Hat), which allows for dual licensing. The Commission’s concern is not so much that MySQL would be re-privatized, but rather that Oracle might not provide strong support for the program. The Commission does recognize, Whelan said, that strong support for MySQL from Oracle could make the database a stronger competitor to Microsoft and other lower-end database providers.

¶13. (SBU) Whelan stressed that, given the newness of many of the open source issue involved in the case, “our minds are more open” than they tend to be in standard cases where an SO has been issued. He said Oracle has the opportunity to demonstrate answers to many of the questions raised by the Commission (such as whether MySQL can technically be upgraded to be a major competitor to Oracle’s existing databases.)

¶13. (SBU) Whelan stressed that, given the newness of many of the open source issue involved in the case, “our minds are more open” than they tend to be in standard cases where an SO has been issued. He said Oracle has the opportunity to demonstrate answers to many of the questions raised by the Commission (such as whether MySQL can technically be upgraded to be a major competitor to Oracle’s existing databases.)

MURRAY

Note: On October 19, 2009, Richard Stallman and KEI sent a letter to EC competition officials, expressing opposition to the Oracle acquisition of MySQL. https://www.keionline.org/ec-mysql Oracle was able to get Eben Moglen to submit an affidavit in favor of the merger, which was eventually approved, without restrictions.

These are a few links to the 2009 discussions of the merger.

A few stories in the trades on August 30, 2011, none of which mention this blog.

How has the Oracle purchase of MySQL worked out? Here is some commentary:

  • April 14, 2010, Warwick Ashford, Open source suppliers not impressed with Oracle MySQL update, ComputerWeekly.Com

    “Oracle has already cut back the MySQL road map to avoid competing with its own database management system,” said Roger Burkhardt, chief executive of open source database management company Ingres. Oracle will try and attract MySQL developers onto a path to costly proprietary software and vendor lock-in and will not add the enterprise grade features required to run Oracle’s own applications, he charged.

    According to Burkhardt, Oracle will use MySQL as open source “window dressing” to try to divert the threat from open source technologies to its database and application server software.

  • October 7, 2010, Gavin Clarke, MySQL veteran drifts clear of Oracle Borg: Oracle brain drainage, the Register

    Oracle has lost a MySQL veteran who helped the plucky database start-up sink permanent roots in the developer and services communities. Kaj Arnö has left Oracle quietly, having submitted his resignation in June two days before Sun Microsystems’ legal entity in Germany ceased to operate. . . .

    Since Oracle’s acquisition, Oracle has lost raw MySQL talent including MySQL architect Brian Aker and his Drizzle engineering team. The loss of another MySQL veteran in Arnö on the back of other Sun exits will counter attempts by Oracle to try and reassure users that their open-source database’s future is safe on the corporate mothership.

    Last year Arnö had tried to convince MySQLers that nothing would change for the worse under Oracle, that their database was safe, and that concerns over the database were unfounded.

    Among the facts he highlighted was a “huge talent pool” of MySQL experts inside Oracle — a talent pool that’s now one member smaller. He also said that Oracle planned to be proactive in its dealings with the community and would emphasize maturing the database.

    Even native Oraclers whose presence had been used to reassure MySQL users have gone. Ken Jacobs, vice president of product strategy, left Oracle in February. Jacobs was tipped to lead the MySQL operation that is now under chief corporate architect Edward Screven. Jacobs had led the InnoDB work after Oracle bought the storage engine that MySQL had relied on

    For his part, Screven last month made it clear that while Oracle plans to work to enhance the community edition of MySQL, it’s going to do so following a roadmap that suits Oracle’s roadmap.

  • November 3, 2010. Gavin Clarke, Oracle kills low-priced MySQL support, the Register.

    Oracle has hiked up the price of MySQL, killing low-priced support options and more than doubling what it charges for the commercial versions of the database. A MySQL annual subscription on a server will now start at $2,000 for standard support, after Oracle’s killed Sun Microsystems’ basic and silver packages, which started at $599 and $1,999. The increase hits startups, small-to-medium businesses, and those on a tight budget hardest. At the high end, Oracle has introduced a cluster carrier grade edition priced at $10,000. Sun’s earlier top-level support package, platinum, was $4,999.

  • January 1, 2011. Oracle Climbs To $36, Could Kill MySQL, Forbes

    Oracle MySQL Contribution Limited: Oracle is likely to have only marginal benefits to its market share through new MySQL database licenses after the acquisition of Sun Microsystems. This is because although MySQL has more than 20% of database installations worldwide, it still has a low market share of 1% in the global database market.

    MySQL is an open source solution and also charges a low fee to its customers. There is speculation that Oracle may kill MySQL as an open source solution by attempting to transition MySQL’s commercial customers to its existing line of database products.

  • August 22, 2011, Alex Woodie, EnterpriseDB Sets Sights on Oracle’s MySQL, IT Jungle.

    Oracle doesn’t appear to be too keen to grow MySQL, which it obtained as part of its Sun Microsystems acquisition in January 2010. After all, Oracle reaps a good chunk of its revenue from selling its eponymous RDBMS. Letting the stops loose on MySQL would, almost by necessity, damage sales of the Oracle database, and therefore decrease profits for the software giant.

    As a result, Oracle keeps MySQL on a short leash. This has manifested in decisions that seem to not make much business sense, unless viewed through the Oracle competition prism. IBM i shops are undoubtedly aware of Oracle’s November announcement to end support and development of MySQL on IBM i, as well as on AIX 5.3 and on several older Linux releases. The wider IT world couldn’t care less about what happens in IBM i-land, but Oracle’s March decision to end all software development for Itanium, which a lawsuit from Hewlett-Packard, has put the spotlight on Oracle’s competitive tactics.

  • August 23, 2011. Dana Blankenhorn, Oracle Wants All Software To Be Proprietary, SeekingAlpha.Com

    As FossPatents reports, Oracle is arguing that Application Programming Interfaces (APIs) and program names, even subroutine names, should have the same copyright protection as the underlying code. And that such protection should be absolute.

    In other words, Oracle could not only claim copyright over the mySQL database, but over the interfaces that connect it to other programs, and the names of the routines within the program.

    This would make interoperability – a key to tying software together – impossible without the express permission and (perhaps payment to) the copyright holder. And that permission could be withheld, or taken back, at the copyright holder’s whim.

  • August 25, 2011, David Rosenberg, Can PostgreSQL pickup where MySQL left off? CNET

    The main thing is to have a platform that users feel comfortable won’t suddenly go from open- to closed-source, which some believe Oracle is already working toward. Article after article blames Oracle for its bad stewardship of open source, whether it be MySQL or Java.

  • September 19, 2011. Jan Wildeboer suggests:

    In light of the new, non-open MySQL extensions that Oracle offers, it might be of interest to the EU competitiveness to compare that with the promises Orace made in the past to get the OK for the SUN/ORCL merger. http://www.informationweek.com/news/storage/security/222002649

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