European Union regulators on Thursday launched an antitrust probe into U.S. software maker Oracle Corp.'s takeover of Sun Microsystems Inc. saying the deal could mean higher prices and limited choice for database software.

EU approval is now the main stumbling block for the $7.4-billion US deal, which has already been cleared by the U.S. Department of Justice.

The European Commission has until Jan. 19 before it makes a final decision whether to clear the deal. The commission often presses companies to make changes that eliminate antitrust worries.

3-month stock chart for Oracle Corp.

EU Competition Commissioner Neelie Kroes said regulators needed to examine the effect of a deal “when the world's biggest proprietary database company proposes to take over the world's leading open-source database company.”

She said the EU executive wanted to check that customers won't see less choice or higher prices as a result – and was keen to make sure that open-source software continues to rival larger companies that develop their own code and don't share it with others.

“In the current economic context, all companies are looking for cost-effective IT solutions, and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions,” she said.

“The commission has to ensure that such alternatives would continue to be available.”

Database worries

EU officials said they plan to look closely at Sun's MySQL database, an open-source product that is popular among web-based companies and competes against Oracle's market-leading database software.

They said they plan to look at “Oracle's incentive to further develop MySQL as an open source database” since it is a potential threat to Oracle's own database software.

MySQL is “widely expected” to put more competitive pressure on Oracle and the others as it becomes “increasingly functional” by adding new features, they said.

The EU described the database market as “highly concentrated” with the three main proprietary software companies – Oracle, IBM and Microsoft – controlling some 85 per cent of the market by revenue.

Oracle's strategy

Oracle's bid for Sun marks new territory the company, turning it into a one-stop technology shop, like IBM Corp. and Hewlett-Packard Co.

It is already expanding aggressively outside its core database software business by moving into business applications and will start making hardware if the Sun deal goes through.

Sun is the world's No. 4 maker of computer servers, which power websites and corporate back offices.

Market research data released Wednesday showed that it has lost market share in servers in the second quarter as customers worried over the company's future and aggressive campaigns by IBM and HP.