Antitrust Law Daily Wrap Up, ANTITRUST—E.U. Gen. Ct.: Cisco’s challenge to EC clearance of Microsoft acquisition of Skype dismissed, (Dec 11, 2013)

By Jeffrey May, J.D.

The General Court of the European Union has upheld the European Commission’s 2011 clearance of Microsoft Corporation’s acquisition of the Internet voice and video communication provider Skype (Cisco Systems Inc. v. European Commission, Case T 79/12, December 11, 2013).

The challenge was brought by Internet-based communications service and software providers Cisco Systems Inc. and Messagenet Spa. The applicants argued that the EC committed a manifest error in its holdings that the merger would not raise any anti-competitive horizontal concerns in the consumer communications markets and that the merger did not raise any anti-competitive conglomerate effects in enterprise communications markets.

Although the court concluded that the applicants had grounds to seek relief, their action, questioning the standard of proof incumbent on the EC when reviewing concentrations, was dismissed. When reviewing the EC’s analysis, the court explained that the Commission “enjoys a margin of discretion.” However, that did not mean that the court would refrain from reviewing the Commission’s interpretation of economic data, it was noted.

According to an EC announcement released today, the judgment confirms that the EC was correct in its assessment that the acquisition would not significantly impede effective competition in Europe. The EC had found that in the area of consumer communications, Microsoft and Skype’s activities mainly overlap for video communications, where Microsoft was active pre-merger through Windows Live Messenger.

“The GC 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,” according to the EC’s statement. In addition, the EC noted that the court accepted its assessment of possible conglomerate effects.

Companies: Cisco Systems Inc.; Messagenet SpA; Microsoft Corp.

Cases: Antitrust