October 5, 2011 9:30 pm

Microsoft to win approval for Skype deal

Microsoft is set to win Brussels approval for its planned $8.5bn (€5.9bn) acquisition of online telephone service Skype, highlighting the turnround in its long-strained relations with European competition authorities.

Joaquín Almunia, the EU competition commissioner, is to give the green light to the proposed deal without any remedies, in spite of complaints from would-be rivals over Microsoft “bundling” the software with Windows.

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The decision to clear the purchase without an in-depth, second-phase investigation will be a relief for Microsoft and will allow the deal to go through without delay.

It follows approval in June from the US Federal Trade Commission, which was satisfied there was sufficient competition from rival online services such as Google Talk to permit the deal to go ahead. Competition reviews are still under way in Russia, Ukraine, Serbia and Taiwan.

Mr Almunia’s decision to clear the takeover without a hitch confirms what has been a dramatic about-turn in Microsoft’s fortunes in Brussels, transforming it from the combative, arch foe of the Commission to a complainant in cases against Google and IBM.

Opponents of the Skype deal – including Messagenet, a Milan-based rival to Skype – revived in their complaints many of the seminal EU battles against Microsoft since the 1990s, arguing the group was again “bundling” software in a manner the Commission stopped with respect to its internet browser and media player.

In explaining the reason for the acquisition, Microsoft argued that putting together Skype, which has 145m active users in an average month, with users of its existing devices and software platforms would boost the attractions of its products.

However, it stressed to competition authorities that the market had completely changed since the original bundling decision, with Windows just one of many available platforms for Skype, a product that achieved success in spite of competition from a Microsoft product.

Microsoft also promised that Skype would always be available on rival software platforms such as Apple’s iOS, which is used in the iPhone and iPad, and Google’s Android smartphone operating systems.

The second main complaint against the deal regarded interoperability, with rival internet telephone service providers demanding information that would permit their customers to connect with Skype users.

Microsoft argued to the Commission that no consumers were locked in to using Skype and that providing open access would require a degree of standardisation that was not prevalent in consumer communications software.

A spokesman for Mr Almunia declined to comment on the decision.

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