Microsoft has thwarted a legal challenge from Cisco to its $8.5 billion takeover of Skype. Cisco said the deal would harm competition.
In a ruling on Wednesday, December 11, the European Union's General Court upheld the decision of EU which gave green signal to Microsoft's acquisition of Skype in 2011. The court overruled claims by Cisco that the deal causes damage to rivals, and ruled in favor of Microsoft.
Cisco, who attempted to block the deal, "failed to demonstrate" that the EU was incorrect in clearing the Microsoft-Skype deal. The court said in a statement that the merger "does not restrict competition" in the consumer-and business-video communications market.
"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 said.
The court ruling implies that Microsoft can continue marketing Skype's video calls to businesses and consumers and it need not make any allowances for Cisco or other companies offering similar products.
In case you're wondering why Cisco was troubled by the Skype deal, it is because the company sells expensive hardware that help businesses with video conferencing. On the other hand, Skype is a cheaper alternative and can achieve similar results with just a computer that has a webcam.
Skype has the distinction of being the biggest Internet video and voice messaging provider. Microsoft's acquisition of the messaging service created monopoly, per Cisco, which disclosed the same at a hearing earlier in May this year. Cisco opined that the European Commission was wrong in approving the Microsoft-Skype deal without demanding concession from the Redmond-based tech company.
The court ruling was welcomed by both Microsoft and the European Commission.
"Today's judgment by the EU General Court confirms that the Commission was correct in its assessment that the acquisition of Skype by Microsoft would not significantly impede effective competition in the European Economic Area," said a EU antitrust regulator.
Post the court ruling, Cisco hinted that it is unlikely to appeal the judgment. However, the company would continue to push for uniformity in video calling systems.
"Cisco is disappointed that the Court did not require the Commission to revisit interoperability requirements for the Microsoft/Skype merger; however we remain committed to interoperability," said a company spokesman in a statement. "We are hopeful that in the interest of customers and consumers, Microsoft and others in the industry will join us and continue to rally around this ideal and work together to achieve an open, interoperable video community."
Cisco share price was down 2.27 percent at $20.41 on the NASDAQ during afternoon trading session on Thursday. Microsoft share price was down 0.44 percent at $37.44 on the same exchange.
