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Mergers: Commission approves acquisition of Skype by Microsoft

Commission Européenne - IP/11/1164   07/10/2011

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European Commission - Press release

Mergers: Commission approves acquisition of Skype by Microsoft

Brussels, 07 October 2011 - The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the Internet voice and video communication provider Skype by Microsoft Corporation because the deal would not significantly impede effective competition in the European Economic Area (EEA) 1 or any substantial part of it.

In the area of consumer communications, the investigation found that the parties' activities mainly overlap for video communications, where Microsoft is active through its Windows Live Messenger. However, the Commission considers that there are no competition concerns in this growing market where numerous players, including Google, are present.

For enterprise communications, the investigation confirmed that Skype has a limited market presence for these products and does not compete directly with Microsoft's enterprise communication product Lync, which is used mostly by large enterprises.

The Commission's investigation also focused on possible conglomerate effects, since Skype and Microsoft are active in neighbouring markets.

The transaction was notified to the Commission for regulatory clearance in the EEA on 2 September 2011.

Background

Microsoft Corporation is a United States based corporation primarily involved in the design, development and supply of computer software, operating system and related services.

Skype Global S.a.r.l. provides communications over the Internet. Its software enables instant messaging, voice, and video communication.

As regards conglomerate effects, the Commission assessed the possibility for Microsoft (i) to degrade Skype's interoperability with competing services and/or (ii) to tie its own products, in particular its leading Windows operating system, with Skype, thereby limiting other players' ability to compete.

As regards consumer communications services, the Commission found that Microsoft would not have an incentive to degrade Skype's current interoperability as it is essential for Microsoft that Skype's services are available on as many platforms as possible in order to maintain and enhance the Skype brand. As regards the risk of tying or bundling, the Commission noted that the vast majority of consumers who acquire a PC with Skype already installed are registered Skype users and that most of them subsequently download a version different from the pre-installed one. Therefore, the proposed transaction will not change the current situation.

As regards enterprise communications services, the Commission found that Skype is currently not an enterprise product, therefore its interoperability is not decisive for competitors and a bundle or a tie between Skype and Microsoft's products will not be a must have product for enterprises. Furthermore Lync faces competition from other strong players in enterprise communications, such as Cisco.

The Commission also assessed other ways with which Microsoft could leverage Skype's large consumer base onto the markets for enterprise communications services but it ruled out negative effects on competition in the time frame relevant for the analysis of the transaction.

Merger control rules and procedures

The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation). Its duty is to prevent concentrations that would significantly impede effective competition in the EEA) or any substantial part of it.

The vast majority of mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

A non-confidential version of today's decision will be available at:

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_6281

Contacts :

Amelia Torres (+32 2 295 46 29)

Marisa Gonzalez Iglesias (+32 2 295 19 25)

1 :

The EU plus Iceland, Lichtenstein and Norway.


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