Sage wants Microsoft's Navision buy investigated

Software maker The Sage Group PLC is trying to persuade European competition authorities to investigate the proposed US$1.3 billion takeover of rival Navision A/S by Microsoft Corp. Danish authorities already have begun an inquiry regarding competition issues at the behest of Sage.

Sage, of Newcastle, England, fears that Microsoft might bundle Navision's accounting applications with its Windows operating system, SQL Server database or Office software and flood the market at a low price, closing it off to others, Sage spokesman Phil Branston said Thursday.

"Bundling could result in unfair competition," he said. "It is worth it for governments to be made aware of this." Sage executives met with Danish, U.K. and European Union competition authorities in the last few days. Trips to France and Germany are planned, Branston said.

However, a spokeswoman for the U.K. Office of Fair Trading said it had not received a complaint from Sage. Nobody at the European Commission competition office was immediately available for comment.

Konkurrence Styrelsen, the competition authority in Denmark, where Navision is based and does most of its business, has launched an investigation to determine whether players on the Danish market share Sage's concerns, said Pia Roenager, a case handler at Konkurrence Styrelsen.

"We are not investigating the acquisition as such, but are investigating the position of the players on the Danish market and we want to see if anybody can agree with Sage," she said. "We never heard about any concerns and we are trying to see if there are any concerns that this merger would hurt competition."

Sage's Branston said Navision has a "near monopoly on the accounting software market" in Denmark, while Microsoft has a dominant position in the database and the operating system markets. Sage itself has little presence in Denmark, he said.

The Danish authority can't rule on the acquisition because neither Microsoft nor Navision has more than 3.8 billion kronor ($477 million) in annual revenue in Denmark, though it can ask the European Commission to look at the deal, according to Roenager, who added that the inquiry will take about two weeks.

The transaction does not require approval from the European Commission as it does not meet the applicable financial threshold. However, if Denmark makes a referral, the Commission, which is already investigating Microsoft on antitrust matters, could launch an investigation.

"This transaction should not raise any regulatory concerns that we can't address satisfactorily," said John Frank, Microsoft's senior counsel for Europe. Microsoft, which is based in Redmond, Washington, expects the acquisition to close in August. The deal, announced early this month, would boost Microsoft's business-software offerings for small and midsize customers. Analysts also expect the acquisition of Vedbaek, Denmark, Navision to go ahead as planned.

"I do not see how Sage can make that complaint," said Bill Clough, a research manager with IDC's European software group.

"It is unlikely that the monopolies authorities would uphold the claim," wrote Nigel Montgomery, a research director for AMR Research Inc. in Europe, in a comment to Sage's complaint. "It's a storm in a herbal teacup."

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