VZCZCXRO7280
PP RUEHIK
DE RUEHBS #1591/01 3291353
ZNR UUUUU ZZH
P 251353Z NOV 09 ZDK ZUI RUEHSD 0004W 3350809 SVC
FM USEU BRUSSELS
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

UNCLAS SECTION 01 OF 03 BRUSSELS 001591 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA 
DOJ FOR CALDWELL HARROP 
DOC FOR DAVID DEFALCO 
 
PLEASE PASS TO USTR DAVID WEINER AND FTC J. 
PARISI 
 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958:  N/A 
TAGS: ECIN ECON EINT ECPS EFIN ETRD EUN
SUBJECT: KROES CABINET CHEF ON ORACLE-SUN, BANKING 
REVIEWS, NEXT COMMISSION DYNAMICS 
 
BRUSSELS 00001591  001.9 OF 003 
 
 
SUMMARY 
------- 
 
¶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. 
 
¶2. (SBU) Whelan said Kroes regretted missing the 
recent TEC meeting and continues to value her close 
relationships with U.S. competition officials.  He 
said she has spent a tremendous amount of time on 
state aid reviews of the many financial sector 
bailout packages member states have enacted during 
the financial crisis.  He said the Commissioner and 
DG COMP have no master plan for the state aid 
reviews, and acknowledged the importance of looking 
at the cumulative impacts of required actions on the 
banking sector.  Whelan noted the increasing 
possibility that Kroes will be reappointed to serve 
in the next Commission, mentioning rumors she could 
get the trade portfolio.   END SUMMARY. 
 
TEC AND COMPETITION CONSULTATIONS 
--------------------------------- 
 
¶3. (SBU) EconMin opened by mentioning the success of 
the recent Transatlantic Economic Council (TEC) 
meeting and noting it was unfortunate that 
Commissioner Kroes had been unable to participate. 
Whelan said Kroes had been looking forward to 
participating in the TEC and explaining Commission 
reviews of financial sector support packages, but at 
the last minute had needed to stay in Brussels to 
address some of those very reviews. 
 
¶4. (SBU) EconMin noted the long history of 
cooperation in competition policy issues, and 
expressed disappointment that the the planned U.S.- 
EU competition consultations had to be postponed. 
He noted USEU's commitment to continuing to 
facilitate close relations between our respective 
competition authorities.  Whelan said Kroes and DG 
Comp feel the same, noting Kroes' subsequent meeting 
in India with FTC Commissioner Kovacic, as well as 
Deputy Director for Antitrust Nadia Calvino's recent 
meeting in DC with DOJ Deputy AAG Molly Boast. 
 
 
FINANCIAL SECTOR STATE AID REVIEWS 
---------------------------------- 
 
¶5. (SBU) Whelan explained that Kroes has spent a 
tremendous amount of time on state aid reviews of 
the many financial sector bailout packages member 
states have enacted during the financial crisis.  He 
acknowledged that the results may lead to some 
transatlantic disinvestments and pullbacks.  The 
Commissioner and DG COMP have no master plan for the 
state aid reviews, but Whelan agreed the Commission 
should probably look at the cumulative impacts of 
required actions (such as divestments by ING and 
 
BRUSSELS 00001591  002.10 OF 003 
 
 
RBS) on the EU and transatlantic banking sector.  He 
noted the Commission's declared intention when 
adopting its restructuring guidelines that measures 
should not undermine the EU internal market.  He 
pointed out that the Commissioner does not insist on 
divestment of assets in particular regions (ex. E. 
Europe) and in fact wants to ensure member states do 
not "close" EU financial markets. 
 
¶6. (SBU) Whelan explained that the state aid reviews 
involve twice weekly joint meetings by DG COMP, DG 
MARKT, DG ECFIN and the Commission legal services to 
examine member state packages.  He said when the 
crisis hit last year DG COMP quickly received more 
resources to conduct the reviews, noting they hired 
former bankers and other experts to assist with the 
reviews.  He added that many of the guarantee and 
recapitalization schemes have already been 
reexamined at least once, to ensure they are working 
and are not market-distorting. 
 
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.) 
 
MICROSOFT UPDATE 
---------------- 
 
¶14. (SBU) Whelan said that the 4-week market test of 
Microsoft's proposed "ballot-screen" remedy to the 
Commission's case against Microsoft's bundling of 
Internet Explorer with Windows concluded last Friday 
(Nov. 13).  He said the ballot screen results (under 
which MS will offer a screen with alternate internet 
browsers that Windows users can download) showed 
some small concerns over screen design, layout, the 
number of security warnings Windows showed users 
installing new browsers, and one or two other small 
issues.  Whelan said "we need to explore these with 
Microsoft" but implied that they were not major 
issues, and reinforced the impression that 
Commissioner Kroes sees this case as nearly 
resolved. 
 
KROES IN THE NEXT COMMISSION 
---------------------------- 
 
¶15. (SBU) Whelan said that while three weeks ago 
there seemed to be zero possibility of Kroes being 
reappointed to the Commission, the Dutch political 
dynamic has since changed.  Kroes is very media- 
savvy in the Netherlands, Whelan noted, and the 
Dutch media have begun a campaign to renominate 
here.  The government is "in the doldrums," he said, 
and there is public resistance to sending one of 
Prime Minister Balkenede's "party hacks" to the 
Commission.  Kroes is seen as tough on banks, which 
is appealing, he added, and PM Balkenende is now 
under some pressure to support Kroes.  Whelan 
concluded that her chance of reappointment has 
grown. (Note: Kroes was subsequently reappointed by 
the Dutch government on November 24.  End note). 
Whelan acknowledged the rumor that Kroes would get 
the trade portfolio but said he had no corroboration 
of this at all. 
 
MURRAY