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EU court dismisses complaints about sanctioning of Microsoft's takeover of Skype

Microsoft's acquisition of internet-based communications provider Skype does not restrict competition , the EU's General Court has ruled.12 Dec 2013

The Court rejected complaints raised by rival internet-based communication providers Cisco and Messagenet that the European Commission was wrong to approve the takeover in 2011.

The European Commission had assessed whether the proposed takeover at the time would have given rise to competition concerns in both the consumer and business markets for internet-based communications services.

The Commission considered that the merger would enable Microsoft to hold between 80 and 90% of the market for consumer video communications made on Windows-based PCs, once the market shares for Skype and Microsoft's existing 'Windows Live Messenger’ (WLM) service were added together. Cisco and Messagenet had pointed to this as demonstrating evidence of the effect the deal would have on competition. However, the General Court said that other factors the Commission had assessed were also relevant to that debate.

In its ruling the General Court said that the Commission was right to consider that there is a faster growing market for smartphones and tablets than there is for PCs and that the WLM had a "weak presence" on those non-PC platforms. It said the merged entity "faces strong competition" in the consumer video communications market as a whole from companies such as Apple and Google.

The General Court also upheld the Commission's view that Facebook would also be an "effective competitor" to Microsoft post its takeover of Skype. It also said that there are no "technical or economic constraints" preventing users of Skype or WLM from switching to other services should Microsoft decide to start charging for those services or stop innovating on communication services.

"The very high market shares and very high degree of concentration [the merged companies would have enjoyed in the market for consumer video communications made on Windows-based PCs], to which the Commission referred merely as a basis for its analysis, are not indicative of a degree of market power which would enable the new entity to significantly impede effective competition in the internal market," the General Court said.

Cisco and Messagenet had also raised concern with the way the Commission assessed the effects the deal would have on competition in the business market for video communications. In particular it said the Commission had failed to sufficiently investigate the possibility that Microsoft could, on an exclusive or preferential basis for its customers, link its existing business communications software product Lync with Skype.

"The new entity could, consistent with the past exclusionary practices of Microsoft, enforce its position of strength in markets related to the enterprise communications market and integrate Lync with other Microsoft products," the companies argued, according to the ruling.

However, the General Court said the concerns were "unfounded" and further ruled that there was no manifest error made by the Commission when forming its assessment of the effect the deal would have on competition in the business market for internet-based communications services.