Cisco loses EU Court Appeal to overturn approval of Microsoft-Skype merger

The Microsoft-Skype agreement has left Cisco fuming (credit: iStock-ene)

Cisco Systems Inc. has lost a court bid in the European Union General Court – the second highest in the region – to overturn approval of Microsoft's 2011 takeover of Skype Technologies.

Cisco is one of the largest makers of networking equipment in the world, holding a large share in the enterprise communications market. It argued that the combination of Microsoft and Skype gave the two companies 80 to 90 per cent of the market for video calling on Windows-based computers.

According to the EU General Court, Cisco "failed to demonstrate" that the EU was wrong to find the Microsoft-Skype merger in line with the bloc's internal market. The merger, the court ruled, "does not restrict competition" in the video communications market for consumers and businesses.

Flawed Reasoning

In October 2011 Microsoft won unconditional approval from the commission to buy the world's most popular international calling service, Skype, for $8.5 billion (£5.1 billion, AU$9.3 billion). A third of the world's voice calls are now made on Skype, with more than 280 million users spending more than 100 minutes monthly.

Regulators from the EU judged that the deal would not harm any competition in the region because the competition was continually growing. It added that the merger faced "numerous players" in the communications market, including Google and Cisco itself.

Cisco told the court during a hearing in May that the deal shouldn't have been allowed so quickly. This was due to the fact that the EU couldn't conclude beyond reasonable doubt (without an in-depth examination) in the original hearing that the transaction posed no problems for competition.

In its appeal Cisco argued that the EU regulator, based in Brussels, used "flawed reasoning" that conflicted with how it had approached previous cases. It will not, however, appeal to the EU Court of Justice, Europe's highest court.

A Microsoft spokesman in Brussels, Robin Koch, welcomed the court's decision.