Microsoft Corporation

Case:

Key Words:

information software, operating system, extraterritorial merger

Reference:

Fair Trade Commission Decision of October 19, 2011 (the 1041st Commissioners' Meeting)

Industry:

Software Design (6201)

Relevant Laws:

Article 11 of the Fair Trade Law

Summary:

1. This case concerns the Microsoft Corporation's (hereinafter referred to as Microsoft) Microsoft's intended acquisition of 100% of the issued shares of Skype Global S.a r.l. via its Microsoft International Holdings B.V. subsidiary, which conforms to the definition of "mergers” given in Article 6 (1)(ii) of the Fair Trade Law. In addition, the Microsoft operating system commands more than one-quarter of the market share in Taiwan, meeting the threshold for reporting mergers as stipulated by Article 11 (1)(ii) of the Fair Trade Law, and given that the exclusions given in Article 11-1 of the same Law are not applicable, Taiwan Microsoft duly submitted an application on its behalf of the proposed acquisition.
2. Findings of the FTC after investigation:
   Both Microsoft and Skype are IT software services, and Microsoft is primarily a provider of such software products as its Windows operating system, among which include Windows Live Messenger (WLM). Skype provides Internet communications software, which can be used for communication via desktop or notebook computers, smart phones and tablet devices using any major operating system. Accordingly, the impact of this merger affects the personal consumer communication services market, and is not anticipated to engender appreciable changes to market share in the operating system market. Moreover, although both Microsoft and Skype provide global customers personal consumer communications services, Skype Out can be utilized to place conventional telephone calls, constituting Category 2 telecommunications, and as required by law an enterprise operating such business is obligated to file an application for permission with the competent authority. As concerns this case, the geographical area affected shall primarily concern that within the territory of Chinese Taipei.
3. Evaluation of merger's impact on restricting competition:
   (1) Horizontal merger: Numerous enterprises (such as Facebook, Google and Yahoo) are operating in this market in Taiwan at present, and given the free provision of related communications software this does not constitute the capacity for unilateral setting of higher price for goods or remuneration for services not subject to the restraints of market competition. Changes to the market structure following the proposed merger are limited, moreover at present Taiwan does not set legal restrictions or barriers to entry on the consumer communications services market, and a wide range of products and services exists. Hence, the proposed merger is not deemed to harm competition among existing businesses, and will not diminish the capacity of transaction counterparts to select the products or services of other
   companies, nor affect their negotiating capacity in the purchase of communications products or services.
   (2) Diversified merger: Although both Microsoft and Skype provide voice communications, instant messaging, and video messaging, only SkypeOut can be utilized to place conventional telephone calls, so that the products and services of the two providers are mutually complementary. Microsoft's cross-enterprise operational development plan can be expected to be completed following the merger. In addition, in accordance with the terms of the Telecommunications Act, telecommunications services must file for permission from the competent authority; however, no legal restrictions or barriers to entry are set for other telecommunications products and services in Taiwan. Accordingly, the merger of Microsoft and Skype is not deemed to have any discernible impact on market competition order, nor to pose difficulty in terms of technological advancement for operation of cross-enterprise operation of related products and services by other enterprises. Furthermore, given that there are 62 enterprises in Taiwan that offer similar Internet-based telephone functions to Skype Out, the merger is not expected to have an appreciable detrimental effect on market competition.
   (3) In views of the above, the proposed extraterritorial merger of Microsoft and Skype does not raise concerns regarding significant restriction of competition, and that it can be considered to contribute overall economic benefit. Consequently, pursuant to the terms of Article 12 (1) of the Fair Trade Law the FTC will not prohibit the merger.

Summarized by Chou, Huang-Chun; Supervised by Liao, Hsien-Chou