On 11th December 2013 the General Court dismissed Cisco Systems’ appeal against a Commission decision of October 2011 to clear the acquisition of Skype by Microsoft (case T-79/12). The judgement confirms the Commission’s assessment of new markets and technologies under the EU Merger Regulation. The Court concluded that the Commission’s decision to clear the transaction did not put the development of innovative products and services at risk and therefore the Commission was correct that the merger would not significantly impede effective competition in the European Economic Area (EEA).
In its own Press Release on the General Court’s judgement the Commission was eager to stress that it will continue to ensure that competition in nascent and fast evolving markets is maintained. It is interesting to note that previously Microsoft was highly critical of the Commission’s assessment of the market for media players in the earlier watershed antitrust Microsoft Decision. Microsoft was critical that the Commission were not paying sufficient attention to quickly evolving markets and technology, yet in this present case, we see the Commission taking a more generous view of quickly developing nascent markets.
In the Commission’s decision clearing the Skype /Microsoft merger in October 2011 (see Commission Press Release: IP/11/1164), the Commission found that the main area of overlap in Microsoft and Skype’s activities were in consumer video communications, where Microsoft was active pre-merger through their Windows Live Messenger product.
The General Court confirmed that the Commission was correct in finding that even on the narrow market for consumer video communications on Windows-based PCs only, Microsoft/Skype’s high combined market share of 80 to 90% was not indicative of market power given the particular characteristics of the market in question, which is marked by short innovation cycles and products which are free. Therefore, if Microsoft started to make PCs users pay for such a product, this would only encourage them to switch to other providers that continue offering their services free of charge. Furthermore, in that quickly evolving and fast growing market where strong competitors are present, account should also be taken of the increasing use of mobile phones and tablets, where Microsoft was a relatively small player.
The Court also fully supported the Commission’s assessment of possible conglomerate effects. In particular the Court rejected the argument that Microsoft would be able to reserve to Lync, its product for enterprise communications, preferential interoperability with Skype and with Skype’s large user base, to the detriment of competitors.
First, the attainment of interoperability between Lync and Skype and a successful marketing of the new product would still depend on a series of factors, which were unlikely to all occur in the near future. Secondly, the precise advantages and the genuine consumer demand for such a combined product were unclear. Lastly, the Court stated that Lync faces competition from other large players on the enterprise communications market, such as Cisco, which alone holds a larger share of the market than Microsoft.