Cisco Loses Legal Challenge To Microsoft Skype Deal

Microsoft has secured a notable legal victory in Europe, after judges in Luxembourg’s General Court ruled against Cisco’s challenge to Redmond’s 2011 acquisition of Skype.

Pointing to the existence of Skype rivals and Cisco’s own large presence in the enterprise video conferencing market, the Court – Europe’s second highest – said Cisco failed to show how the deal could be considered anti-competitive.

Not Anti-competitive

“Microsoft’s acquisition of Skype is compatible with the (European Union’s) internal market. The merger does not restrict competition either on the consumer video communications market or on the business video communications market,” the judges ruled, according to a 11 December Reuters report.

Microsoft is now free to “continue to market Skype’s video calls to consumers and businesses without making any concessions to Cisco or others offering similar products,” said the report.

A Microsoft spokesperson told eWEEK, “We are glad that the EU General Court has confirmed the Commission’s earlier decision.”

Cisco spokeswoman Alison Stokes told Reuters, “Cisco is disappointed that the court did not require the Commission to revisit interoperability requirements for the Microsoft/Skype merger.” Cisco will not appeal the ruling to Europe’s highest court.

Early last year, Cisco appealed the European Commission’s approval of the Skype deal, valued at a hefty $8.5 billion (£5.2bn). “Cisco does not oppose the merger, but believes the European Commission should have placed conditions that would ensure greater standards-based interoperability, to avoid any one company from being able to seek to control the future of video communications,” Marthin De Beer, senior vice president of Cisco’s Video and Collaboration Group said in a company blog post concerning the move.

“This appeal is about one thing only: securing standards-based interoperability in the video calling space,” he added.

eWEEK reported in a 15 February, 2012, article: “Cisco wants interoperability between its products and those of the combined Microsoft-Skype entity, particularly when it comes to the enterprise and small and midsized businesses (SMBs).” Microsoft has since integrated Skype with Lync, the company’s enterprise communications platform.

In May, the companies headed back to Luxembourg. Cisco asserted that after the Skype deal, Microsoft controlled 80 to 90 percent of the video calling market on Windows PCs. The company’s lawyer described the European Commission’s assessment of the multibillion dollar transaction as “careless.”

Product Change?

A war of words erupted. Microsoft lawyer Georg Berrisch told Bloomberg, “Cisco pretends to seek interoperability, but what it actually seeks is that it wants Microsoft to change its products,” Berrisch said, according to Bloomberg.

Microsoft completed its acquisition of Skype in October 2011, which by that time had already amassed more than 600 million users. In April, the company boasted that its massive user base spends 2 billion minutes each day on the platform.

Microsoft succeeded in acquiring a company Cisco was rumoured to have once attempted to buy. The San Jose, California-based network equipment provider reportedly made a failed bid for Skype in 2010. Google was also said to have been interested in Skype but reversed course out of antitrust concerns.

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Originally published on eWeek.