Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Microsoft attempted to acquire monopoly on Voice-over Internet Protocol service to and from India, competitor charges, (Aug 13, 2013)

By Tobias J. Gillett, J.D., LL.M.

A provider of Voice-over Internet Protocol (VoIP) services in India has filed a complaint in the federal district court in Newark, alleging that Microsoft Corp. has attempted to obtain a monopoly on VoIP service to and from India through its failure to comply with Indian laws regulating VoIP providers (TI Investment Services, LLC v. Microsoft Corp., filed August 12, 2013).

World Phone Internet Services Pvt. Ltd. provides VoIP services in India. TI Investment Services, LLC is a New Jersey company formed to fund World Phone. In their complaint, the companies allege that Microsoft and its subsidiary Skype have attempted to acquire a monopoly in the market “for non-mobile VoIP traffic originating or terminating between the United States and India” through its failure to comply with Indian licensing requirements.

According to the complaint, World Phone entered into a License Agreement for Provision of Internet Services (with Internet Telephony) with the Ministry of Communications and Information Technology, Department of Telecommunications, Telecom Commission of the Government of India on April 8, 2002. Under the license agreement, World Phone had responsibility for submitting a biannual report on its quality of service; installing, testing, and commissioning equipment; and providing service without discrimination, among other provisions. A 2006 amendment required World Phone to pay a 6% license fee on its annual adjusted gross revenue, with provisions for penalties for late payments. In January 2008, a further amendment allegedly required providers of telephony services in India “to have their equipment and hardware physically located in India.”

Microsoft acquired Skype, “by far the largest VoIP provider in the world,” in 2011. In 2011 and 2012, World Phone’s auditors allegedly determined that, despite World Phone’s bandwidth revenues increasing by 50 percent from 2009 to 2012 and World Phone spending over $3 million on advertising its VoIP services, its internet telephony revenues had declined due to the “unlawful conduct” of Microsoft and other VoIP providers in failing to comply “with the civil and criminal laws promulgated in India to regulate Internet Telephony service providers.” Microsoft has purportedly committed these violations “knowing[ly] and deliberate[ly],” and does not have any VoIP infrastructure in India dedicated to the provision of Indian VoIP services, despite a request from the Government of India that it set up such infrastructure in India. “Microsoft is not listed as a licensed VoIP operator by the Government of India,” according to the complaint.

The complaint alleges that Microsoft’s conduct “has effectively stifled competition from companies such as Plaintiffs who are compliant with Indian VoIP regulatory law.” Microsoft’s “global dominance in computing services and its unlawful behavior,” coupled with its failure to notify consumers that their use of its VoIP services could violate Indian law, has allegedly “created a dangerous probability of its obtaining a monopoly within the Relevant Market.” Rather than benefiting competition by lowering prices to consumers, the complaint contends that Microsoft’s conduct “disregard[s] a regulatory scheme meant to protect consumers,” and “open[s] up its users to potential liability.” Although other companies—such as Google, Inc., Vonage Holdings Corp., and magicJackVocalTec, Ltd.—have also “tacitly conspired” with Microsoft to flout Indian law, “the injury sustained by the competitive process is greatest as a result of [Microsoft’s] conduct because of its attempted monopolistic position.”

In addition, the complaint asserts that Microsoft has engaged in predatory pricing of its VoIP services because its costs have been “artificially kept low due to its failure to comply with applicable law.” Moreover, Microsoft has allegedly sustained “ongoing intangible losses based on the reputational risk it was accepting by ignoring applicable regulatory law,” and risks costs from enforcement activities by the Indian government. However, the complaint asserts that Microsoft has a “reasonable expectation” of recouping these losses through monopoly profits.

The complaint asserts claims for violation of Sections 1, 2, and 3(b) of the Sherman Act, violation of New Jersey Antitrust Act, common law unfair competition, and tortious interference with prospective economic relations. It seeks a judgment “of no less than $9 million, including interest, treble final damages awarded, reasonable attorney’s fees, cost of suit, costs of investigation and expenses”; punitive, compensatory, consequential, incidental, and direct damages; a permanent injunction; and any other just and appropriate relief.

The case is No. 3:13-cv-04823-FLW-TJB.

Attorneys: Jean-Marc Zimmerman (Zimmerman & Weiser LLP) for TI Investment Services, LLC.

Companies: TI Investment Services, LLC; World Phone Internet Services Pvt. Ltd.; Microsoft Corp.

News: Antitrust NewJerseyNews