Oracle Corp. (ORCL) is reluctant to give up MySQL database to gain antitrust clearance in Europe for its tie-up with Sun Microsystems (JAVA), due to its rivalry with Microsoft (MSFT), according to a document seen by Dow Jones Newswires Wednesday.

Oracle's position is that in the market for small to medium-sized business databases, Sun's MySQL database product, enables the company to compete against Microsoft, which is the market leader in that segment, according to a questionnaire sent out by the European Commission to the firm's clients and competitors. The questionnaire is being used to assess the validity of Oracle's argument.

A person familiar with the investigation also confirmed that Microsoft rivalry was a concern.

Oracle's $7.4 billion acquisition of Sun depends on an all-clear from Brussels, but the deal was dealt a blow in early September when the European Commission launched an in-depth four-month inquiry citing MySQL as a possible problem area. U.S. authorities have already cleared the acquisitions without asking for any divestments.

Europe's top antitrust enforcer said that it launched the in-depth probe due to concerns that the deal might reduce competition in the database market, where both companies have products and triggered fears that MySQL may have to be sold for antitrust clearance.

The commission is now asking whether Oracle's argument that Sun's MySQL database directly competes against Microsoft's databases is valid.

MySQL is a small player in the database market and in Sun's overall business, but the commission expects it to become a bigger competitor in the software market if it is developed further.

Global database markets are concentrated, with Oracle, International Business Machines Corp (IBM). and Microsoft Corp. controlling about 85% of the market in terms of revenue. The commission worries Oracle might not have any incentive to continue developing MySQL as a rival product to its own brands.

But Oracle argues that the small and medium-sized business market where MySQL excels, doesn't directly compete with Oracle's own products but rather with those of Microsoft.

The commission's questionnaire seeks to find out whether it is correct to assume that MySQL is not in competition with Oracle, and whether Oracle's stated desire to compete against Microsoft gives incentives to the company to continue with the development of MySQL, according to the questionnaire.

Oracle makes databases and other software for corporations, while Sun makes computer servers and owns the widely used Java programming software and the MySQL open-source database program.

The deadline for responses to the MySQL questionnaire is Oct 5. The commission has until Jan. 19 to rule on the takeover.

Any delay in the antitrust clearance is likely to be a problem for Sun which continues to lose customers because of uncertainty over the merger.

Oracle declined to comment on the developments.

-By Peppi Kiviniemi, Dow Jones Newswires; +3227411483; peppi.kiviniemi@dowjones.com