Judgment — ECLI:EU:T:2013:635
Date: 2013-12-11
Language of the case: English
Court formation: Fourth Chamber
Subject matter: Competition;Concentrations between undertakings
Procedure: Action for annulment - unfounded
Origin: Italy

summary fashion to Cisco’s arguments, particularly as Cisco was perfectly able to understand the reasoning of that analysis, as is demonstrated by the present application. 114 It follows that the first complaint of the second plea must be rejected as unfounded. – Whether there was a manifest error of assessment 115 In order to clarify its appraisal criteria as laid down in Article 2 of Regulation No 139/2004 in the area of concentrations generating conglomerate effects, the Commission published Guidelines on the assessment of non‑horizontal mergers under the Council Regulation on the control of concentrations between undertakings (OJ 2008 C 265, p. 6). It is apparent from paragraphs 11 and 92 of those guidelines that this type of concentration does not involve competing undertakings, such that these concentrations are less likely to significantly impede effective competition than horizontal concentrations. Moreover, they may enable the parties involved to achieve efficiencies. 116 However, concentrations generating conglomerate effects may in certain circumstances give rise to competition concerns. That may be the case inter alia where the concentration enables the new entity to pursue a market foreclosure strategy. According to paragraph 93 of the Guidelines on the assessment of non‑horizontal mergers under the Council Regulation on the control of concentrations between undertakings, market foreclosure may occur if the combination of products in related markets confers on the merged entity the ability and incentive to leverage a strong market position on one market to foreclose competition on another market. According to the case‑law, that effect on the other market must be foreseeable in the relatively near future in order for the concentration to give rise to competition concerns under Regulation No 139/2004 (see, to that effect, Case T‑5/02 Tetra Laval v Commission [2002] ECR II‑4381, paragraphs 148 to 153). 117 As regards proof of such conglomerate effects, the case‑law has established that the quality of the evidence produced by the Commission in order to establish that it is necessary for it to adopt a decision declaring a concentration incompatible with the internal market is particularly important. The assessment of a conglomerate-type concentration is based on a prospective analysis in which, first, the consideration of a lengthy period of time in the future and, second, the leveraging necessary to give rise to a significant impediment to effective competition mean that the chains of cause and effect are dimly discernible, uncertain and difficult to establish (Bertelsmann and Sony Corporation of America v Impala, paragraph 50; see, to that effect, Commission v Tetra Laval, paragraph 44). 118 It should be borne in mind that the Commission may declare a concentration incompatible with the internal market only if the significant impediment to competition is the direct and immediate effect of the concentration. Such an impediment, which would stem from future decisions by the merged entity, may be regarded as a direct and immediate effect of the concentration, if that future conduct is made possible and economically rational by the alteration of the characteristics and the structure of the market caused by the concentration (Case T‑342/99 Airtours v Commission [2002] ECR II‑2585, paragraph 58; see, to that effect, Gencor v Commission, paragraph 94). 119 In the present case, the applicants complain in particular about the opportunity that the new entity has to distort the conditions of competition on the enterprise communications market in favour of Lync by guaranteeing preferential interoperability for that product with Skype and thus with the large user base of that communications program. 120 It is common ground that that interoperability was not yet guaranteed at the date of adoption of the contested decision and that it still required relatively lengthy and complex innovative work. According to the information supplied by the intervener which was not called in question by the applicants, the creation of a network bridge between Lync and Skype is only likely to be completed in 2013. In addition, on the assumption that that work is completed on time, the new entity would still have to devote effort to marketing the new product to potentially interested business customers. That marketing campaign would therefore take place during 2014. Lastly, in order that the anti‑competitive effects feared by the applicants could occur in 2014, the Commission having referred to a period of three years following the date of adoption of the decision, it would still be necessary for that marketing campaign to be commercially successful to such a large extent that it would tip, almost immediately, the enterprise communications market in favour of Lync and would enable the new entity to foreclose the market. Such commercial success would imply a major change in the position of the operators on the market and would mean in particular that Lync’s market share on the enterprise communications market, which was 16% in 2011, would evolve significantly in comparison with Cisco’s, which was 32% in 2011. 121 The foreclosure effect feared by the applicants therefore depends on a series of factors in relation to which it is not certain that they might all occur in a sufficiently near future, such as is necessary in order for the prospective analysis of the effects of the concentration not to become purely speculative (see paragraph 116 above). In this respect, as mentioned in the previous paragraph, the Commission referred to a period of three years following the date of adoption of the decision. That period, which the applicants have not moreover disputed, is relatively long where, as in the present case, the sector concerned is a new technology sector which is characterised by relatively short innovation cycles. Lastly, the applicants’ reasoning is based not only on future and uncertain events, but also disregards the possibility that competitors of the new entity will adjust their marketing and technological strategies to anticipate and counteract a possible foreclosure strategy. 122 It must therefore be concluded that the market foreclosure effects of which the applicants complain are too uncertain to be considered a direct and immediate effect of the concentration. 123 In addition, even if the negative effects feared by the applicants could be considered as being a consequence of the concentration, it is not possible to conclude, for the reasons set out below, that the Commission committed a manifest error of assessment by deciding that there were no serious doubts as to the compatibility of the concentration with the internal market. 124 With respect, in the first place, to the ability of the new entity to foreclose the market, as an initial remark, it should be observed that the explanations given by the applicants regarding the competitive advantage that the new entity enjoys are vague. It would appear from those explanations that, by the integration of Lync with Skype’s user base, the new entity supposedly has a significant business advantage on the enterprise communications market. That integration allegedly enables business users to communicate, including visually, with their customers and other business contacts, such as suppliers and distributors, using the same software as that used for communicating internally within an undertaking. 125 However, the applicants provide no tangible evidence of the existence, scale or development of the demand for such a product. They refer to information that Cisco provided the Commission during the administrative procedure, which merely mentions the names of several large undertakings or sectors which might wish to communicate with users of Skype, without specifying however whether or not those wishes relate to the future product integrating Lync and Skype. By contrast, the intervener produced specific information regarding the lack of interest on the part of Lync customers for an instant messaging communications tool. 126 Second, even if there was real and significant demand for a communications tool such as the one resulting from integrating Lync with Skype, the applicants have failed to explain why business users might wish to specifically communicate with users of Skype. The applicants merely rely on Skype’s large user base and the new entity’s supposed dominant position on the consumer communications market, in particular for video calls on Windows-based PCs. As the Commission rightly observes, undertakings potentially interested by an integrated communications tool wish primarily to communicate with consumers of their products and services and not with users of Skype. It is not clearly apparent whether these users are also current or potential customers of undertakings that might be interested in purchasing the product resulting from the integration of Lync with Skype and even less that these users wish to communicate visually with those undertakings. 127 In addition, on the assumption that users of Skype constitute a commercially attractive group of consumers, Skype does not allow undertakings to canvass such users actively. As stated by the Commission and the intervener, it is not possible to contact users of Skype, who normally use a pseudonym, without their prior authorisation. Conversely, in the event that the commercial interest of the product resulting from the integration of Lync with Skype relates to the possibility for users of Skype to contact undertakings which sell them goods and services, the applicants provide no information regarding the commercial advantage of that integrated product in comparison with other methods of communications between undertakings and consumers, such as the traditional telephone communication. The Commission and the intervener correctly observe that it is not credible, on account of those other methods of communication, that the product resulting from the integration of Lync with Skype would become a ‘must have’ product for undertakings wishing to communicate with their consumers. It should also be observed that Skype’s application continues to be available and downloadable after the concentration and that it is therefore entirely possible for any undertaking to enable its customers to contact it by Skype by indicating its Skype ID on its goods, in its advertising or on its internet site. In order to communicate with users of Skype, it will not be necessary for an undertaking to have the product formed by the integration of Lync with Skype. 128 Third, in the event that the product resulting from the integration of Lync with Skype gives the new entity a real commercial advantage, that entity would still not have the ability to pursue a strategy of market foreclosure. On the one hand, it follows from the analysis of the first plea that the concentration does not give rise to serious doubts as to its compatibility with the internal market with respect to consumer communications services. On the other hand, as was observed in paragraph 121 above, Lync’s competitors, including Cisco, still have sufficient time to develop commercial strategies aimed at counteracting the market foreclosure strategy that the new entity might possibly decide to follow. Those competitors could adjust their prices, the quality or functionality of their products or have recourse to the services of other large providers of consumer communications services, such as Facebook, Twitter and Google. It should be noted, in this respect, that a number of undertakings are already connected to that type of network, as the intervener submits. 129 The applicants cannot dispute the new entity’s weak degree of market power by referring to recital 143 of the contested decision, in which the Commission recognised Microsoft’s ability to engage in foreclosure strategies on other markets. That recital does not relate to the enterprise communications market, but concerned rather the consumer communications market and in particular the potential for the new entity to combine other products of Microsoft, specifically Windows, Windows Internet Explorer or Microsoft Office, with Skype. 130 Moreover, the applicants have adduced no other evidence demonstrating that the new entity has the ability to engage in the market foreclosure strategy which they allege. 131 With respect, in the second place, to the incentives for the new entity to pursue such a strategy, it should be borne in mind that the applicants did not adduce any specific information regarding the gains that that strategy might secure for the new entity. They merely refer to the large size of Skype’s user base, to the value of the transaction which amounts to USD 8.5 billion, to certain statements by Microsoft’s Chief Executive Officer and to Microsoft’s previous exclusionary practices. 132 In the absence of any information regarding the existence, extent and nature of the demand for a product integrating Skype and Lync, it is difficult, or even impossible, to assess whether an exclusionary strategy may turn out to be profitable for the new entity. In addition, in so far as Skype is still available as downloadable software for all users, including undertakings, it is also difficult to know whether those undertakings will prefer the integrated product over a competing enterprise communications application alongside which they will have downloaded the Skype software. References to earlier commercial practices which concern different markets to the consumer communications market, to the value of the transaction and to general commercial statements by certain representatives of Microsoft cannot compensate for those shortcomings. 133 There are therefore no tangible factors to support the conclusion that the new entity would have the incentive to implement a market foreclosure strategy. 134 With respect, in the third place, to the probable overall effect of such a strategy on prices and choices, the Court notes, as did the Commission and the intervener, that the presence of Lync on the enterprise communications market is certainly significant, but that it is lower than that of its competitors and, in particular that of Cisco. Since implementation of the strategy will last several years (see paragraphs 120 and 121 above), it was not foreseeable at the time of adoption of the contested decision that such a strategy might result in a reversal of the competitive landscape in favour of Lync following the decision. 135 The fact that Lync could be sold in conjunction with other products from the Microsoft range does not alter that finding, since such a sales strategy is not dependent on the concentration concerned by the contested decision. 136 Consequently, the Commission did not commit a manifest error in its assessment of the conglomerate effects on the enterprise communications market. 137 It is therefore necessary to reject the second complaint of the second plea as unfounded and, therefore, the second plea in its entirety. 138 In view of the foregoing, the application for annulment of the contested decision must be dismissed. 139 Lastly, with respect to the first head of claim, the applicants essentially request the Court to adopt a measure of organisation of procedure obliging the Commission to provide the Court with all documents related to negotiations concerning communications between the Commission and the parties to the transaction on possible interoperability commitments. Since it is apparent from the foregoing considerations that the Commission did not commit a manifest error of assessment by approving the concentration on the basis of Article 6 of Regulation No 139/2004, there is no longer any need to consider, in the context of the present application, whether the Commission might have had discussions on interoperability commitments. The Court therefore takes the view that it is not necessary to adopt the measure of organisation of procedure sought in the first head of claim. Costs 140 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. As the applicants have been unsuccessful, they must be ordered to pay the costs, in accordance with the form of order sought by the Commission and the intervener. On those grounds, THE GENERAL COURT (Fourth Chamber) hereby: 1. Dismisses the action; 2. Orders Cisco Systems Inc. and Messagenet SpA to bear their own costs and to pay those incurred by the European Commission and Microsoft Corp. Papasavvas Van der Woude Wetter Delivered in open Court in Luxembourg on 11 December 2013. [Signatures] Table of contents Facts Parties to the proceedings Administrative procedure Content of the contested decision Procedure and forms of order sought Law Admissibility Substance The standard of proof on the Commission and the standard of judicial review First plea in law, on the horizontal effects of the concentration on the consumer communications market – Market share – Network effects – Competitive harm Second plea in law, on the conglomerate effects of the concentration on the enterprise communications market – The statement of reasons – Whether there was a manifest error of assessment Costs * Language of the case: English.