Cisco loses Skype monopoly case against Microsoft

Software vendor Microsoft has won a case against leading networking vendor Cisco, which said the $8.5 billion takeover of Skype messaging service created a monopoly.

Consumers and enterprises have been switching to cheaper Internet-based voice and video services such as Skype, Viber, Google Talk and WhatsApp. Cisco and companies such as Polycom are facing crisis due to the dominance of cheaper video calling.

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, said Microsoft Chief Operating Officer Kevin Turner in March.

Cisco will not appeal against the Thursday’s court order. The Luxembourg-based General Court said Cisco failed to show that the takeover would harm competition.


“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 said that Cisco’s large share of the enterprise communications market and the existence of other rivals prevents Microsoft from impeding competition in this sector.

Media reports suggest that Microsoft fended off a challenge to its $8.5 billion takeover of messaging service Skype when Europe’s second-highest court ruled against claims by rival Cisco that the 2011 deal would harm competition.

The important decision enables Microsoft to continue to market Skype’s video calls to consumers and businesses without making any concessions to Cisco or others offering similar products.

Cisco’s concern about the Skype deal stems from the fact it sells more expensive hardware to help companies with video conferencing, while Microsoft’s alternative based on Skype can do much the same via a computer equipped with a webcam.

Cisco said at a hearing in May that Microsoft’s acquisition of Skype, the largest Internet video and voice messaging provider, created a monopoly. Cisco said the European Commission was wrong to approve the deal without demanding concessions from Microsoft.

Cisco filed its challenge together with Italian fixed-line and Internet telephone provider and Skype rival Messagenet.

To defend itself against Microsoft, Cisco had pushed for a common set of technology standards in video conferencing to make sure that products offered by different firms work together. It had hoped to get backing from the EU case to ensure such inter-operability of video calls.

Though Cisco is claiming that it focuses on inter-operability, a couple of rivals told earlier that Cisco is not supporting open standards and that’s why these rivals are unable to grow further and do business with Cisco clients.

“Cisco is disappointed that the court did not require the Commission to revisit inter-operability requirements for the Microsoft/Skype merger. However we remain committed to inter-operability and will continue to work to make video calling as easy as making a phone call or sending an email,” said Cisco spokeswoman Alison Stokes.

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