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) 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.

“We’re pleased that the European Commission has approved Microsoft’s acquisition of Skype. This is an important milestone, as we’ve now received clearance from both the United States and the European Union. We look forward to completing soon the final steps needed to close the acquisition, bringing together the employees of Microsoft and Skype, and creating new opportunities for people to communicate and collaborate around the world”, said Brad Smith, General Counsel and Executive Vice President, Microsoft Corporation, regarding the European Commission’s decision to approve Microsoft’s acquisition of Skype.

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, adds the Commission.

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 to degrade Skype’s interoperability with competing services and/or  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.