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Cisco challenges Microsoft’s acquisition of Skype

Cisco argues that the acquisition creates an unfair monopoly, and that Microsoft was required to make no concessions in its purchase. “This was a very serious case and there were many factors to show that there could be serious harm for consumers," Cisco’s lawyer told the EU General Court. “The commission brushed off these concerns. Its assessment was, with all due respect, careless.” Cisco is effectively arguing that the approval process was flawed and should be rescinded.

The stakes are high. Skype has close to 200 million users and around a third of the world’s voice communication is now via Skype. The acquisition means that Microsoft controls 80% − 90% of the market for video calls on Windows-based computers. 

But it’s not monopolistic, argued the Commission. According to Reuters, the Commission’s lawyer Corneliu Hoedlmayr, claimed, “The applicants have failed to provide evidence of competitive harm," citing the existence of other rivals to Skype such as Google Talk and Cyprus-based calling and messaging servicer Viber. "Other technologies are emerging. If these succeed, it may render Skype a relic.”

Cisco does not have precedent on its side. The last successful appeal against a Commission decision was in 2002, involving the Sony Music and BMG record labels – the court more frequently rules with the Commission. It may be, however, that Cisco’s intent is not to dismantle the acquisition but simply to force Microsoft into making greater interoperability concessions. According to CNBC, Cisco's chairman and CEO, John Chambers said on CNBC's Closing Bell, "All we want is interoperability, that's what Microsoft and others have asked of us when we've had acquisitions and we think there needs to be easy interoperability... the capability of any device to [connect to] any content that we think allows the Internet to grow.”

The court is expected to make its ruling within the next few months. Either way, it can be appealed at the EU’s highest court, the European Court of Justice. Meanwhile, users will be watching events, with growing concern over the extent of Microsoft’s monitoring and surveillance of Skype chats.