Microsoft Clears Regulatory Hurdle For Skype Acquisition

The Federal Trade Commission (“FTC”) has approved Microsoft’s $8.5 billion purchase of Internet telephone giant Skype. 

Opponents of the deal have pointed to several aspects of Microsoft’s purchase of Skype that they claimed would negatively impact competition.  They expressed concern about greater horizontal integration because Microsoft already offers a similar service through its Windows Live product.  Industry experts and Skype users alike also worried that the deal would mean Microsoft limiting Skype support to its own platform.

While the FTC does not publish the reasoning for these decisions, its swift approval of the deal indicates that it did not find these concerns compelling. 

Microsoft had a number of factors working in its favor, most importantly the robust competition in the Internet telephone market.  Industry heavyweights Google and Apple both have services that directly compete with Skype.  Google and Apple rival Microsoft in resources and market power, making it less likely that Microsoft’s control of Skype would enable it to dominate the market.  Microsoft’s plan to keep Skype as a separate division and its promise not to limit support to its own operating system were also important in allaying fears of anticompetitive practices.  

Microsoft says that it hopes to complete all further regulatory procedures by the end of the calendar year.

The FTC reviewed the acquisition under the Hart-Scott-Rodino Act of 1976, which requires the FTC and the Department of Justice (“DOJ”) to investigate mergers valued at more than $65.2 million to avoid anticompetitive outcomes.  Because it is often exceedingly costly or even impossible to restore a market to a healthy, competitive condition, the FTC and DOJ are tasked with preventing anticompetitive effects through the merger approval procedure.  The agencies examine more than 1,000 such cases each year, the vast majority of which are approved.