CELEX: 32013M7047
Language: en
Date: 2013-12-04 00:00:00
Title: Commission Decision of 04/12/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.7047 - MICROSOFT / NOKIA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 4-12-2013
C(2013)8873

[pic]

                                        |To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case No COMP/M.7047 – Microsoft/ Nokia
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1) On 29 October 2013, the European Commission received a notification of a proposed concentration pursuant to Article 4  of  Council  Regulation
   (EC) No 139/2004 by which Microsoft Corporation ("Microsoft", US) will acquire sole control over substantially all of the Devices  &  Services
   business (the "D&S Business") of Nokia Corporation ("Nokia", Finland). Microsoft and the D&S Business are collectively  referred  to  as  "the
   Parties".

       THE PARTIES

2) Microsoft is a US-based multinational technology company primarily involved in the  design,  development  and  supply  of  computer  software,
   hardware devices and related services. In the past decade, Microsoft has expanded its business from operating systems  ("OSs")  and  PC  based
   productivity software into consumer hardware (including gaming consoles, portable digital music  players  and,  most  recently,  tablets).  It
   develops and licenses the Windows operating system for server, PC and mobile devices and supplies a variety of software applications as well.

3) The D&S Business comprises Nokia's Mobile Phones and Smart Devices business units as well as design team and operations (including  production
   facilities, sales and marketing activities and related support functions). The Mobile Phones business unit  focuses  on  the  development  and
   supply of basic/feature mobile phones and related software, while the Smart Devices unit covers smartphones and the  recently  launched  Lumia
   tablet.

       THE CONCENTRATION

4) Pursuant to a Stock and Asset Purchase Agreement signed on 2 September 2013, the acquired D&S Business includes the 'Mobile Phones  and  Smart
   Devices' business unit, design team and operations including all of the D&S Business production facilities, Devices &  Services-related  sales
   and marketing activities, related support functions, and non-standard essential  patents  ("non-SEPs")[2]  that  read  on  the  devices  being
   produced by the D&S Business. Microsoft will also receive from Nokia a 10-year non-exclusive license to approximately 30  000  SEPs,  non-SEPs
   and pending SEP and non-SEP patent applications (if any), with an option to extend to perpetuity against further compensation.

       EU DIMENSION

5) The undertakings concerned have a combined aggregate world-wide turnover of more than  EUR  5  000  million[3].  Microsoft  had  a  world-wide
   turnover of EUR 75.5 billion in its financial year ending June 2013. The D&S Business had a world-wide turnover of EUR […]  billion  in  2012.
   Both of them had an EU-wide turnover in excess of EUR 250 million. Microsoft had an EU-wide turnover of EUR […] billion in its financial  year
   ending June 2013. The D&S Business had an EU-wide turnover of EUR […] billion in 2012. Both do not  achieve  more  than  two-thirds  of  their
   aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

       COMPETITIVE ASSESSMENT

6) Microsoft is active in a number of sectors that are relevant for the assessment  of  the  proposed  transaction.  In  more  detail,  Microsoft
   manufactures and supplies the Surface series of tablet devices. Microsoft also develops and licenses an OS for  smartphones  (Windows  Phone),
   OSs for tablets (Windows RT and Windows 8) as well as applications running on top of its own and/or third party mobile  OSs,  including  Skype
   and Microsoft Office Mobile. Microsoft further develops and licenses Microsoft Exchange, an  enterprise  mail  server  software  product,  and
   Exchange ActiveSync ("EAS") a protocol managing communication and synchronisation between smart mobile devices and Microsoft Exchange.

7) The D&S Business is active exclusively in the manufacturing and supply of basic and feature mobile phones, smartphones and tablet devices.

8) In light of the above, the sectors that the Commission takes into account in the assessment of the proposed  transaction  are  the  following:
   (1) manufacturing and supply of mobile devices; (2) developing and licensing of mobile OSs; (3) developing and licensing of  applications  for
   mobile smart devices; and (4) developing and licensing of email server software and related synchronization protocols.

1 Relevant markets

1 Relevant product markets

9) Microsoft submits that the proposed transaction involves the market for mobile ecosystems. According to  Microsoft,  “ecosystems”  comprise  a
   broad set of software products and services (including OS functionality, applications,  and  cloud  services)  running  on  multiple  devices,
   including smartphones, tablets and PCs. None of these elements compete in isolation. Rather, they are part of broader ecosystems that  compete
   with each other to attract users, device makers and application developers.

10) Microsoft also submits that consumers choose an ecosystem based upon a number of factors, including availability of “must have”  applications
   (“apps”) and a wide choice of other apps, attractiveness and functionality of devices, total cost of ownership (including  connectivity),  the
   attractiveness of the user interface and the “user experience” more broadly. Individual users may weigh these  factors  differently,  but  the
   elements they weigh are fairly consistent. Enterprise users (and IT administrators) consider another set of  ecosystem  metrics,  giving  high
   priority to security, separation of business and personal accounts and total cost of ownership.

1 Mobile devices (basic and feature phones, smartphones and tablets)

1 View of the Notifying Party

11) Microsoft submits that basic and feature phones are not part of the same relevant product market as  smartphones.[4]  In  terms  of  physical
   characteristics such as screen size and processing power, but also based on their different operating system and pricing,  smartphone  devices
   can be clearly distinguished from basic and feature phones.

12) Microsoft also submits that the competitive assessment of the proposed transaction does not depend on whether smartphones and tablets[5]  are
   included in a single market for smart mobile devices or whether they are part of separate markets. However, Microsoft notes that, despite  the
   on-going trend of convergence between smartphones and tablets, these two types of devices are not identical. Although a number of smart mobile
   devices referred to as "phablets" or "mini tablets" have been introduced on the market recently there is still a  stable  difference  in  size
   between smartphones and tablets. While most tablet screens are at least 7 inches, the screen size of smartphones rarely exceeds 5  inches.  As
   regards technical characteristics, all smartphones support SIM card-based switched voice and SMS communication but tablets do not.

13) Microsoft further submits that there is no separate market for smart mobile devices for corporate users given the fact  that  current  trends
   indicate "consumerisation" of mobile devices. Smartphones, and to a less extent tablets, are used both at home and at work  since  the  Bring-
   Your-Own-Device (“BYOD”)[6] policy is spreading within the business and corporate world. As a result, certain producers of smartphones include
   in their product lines "business ready" smartphones that support advanced security features, data encryption  and  other  features  considered
   important by corporate users. Device manufacturers, such as Apple and Samsung, also offer the same smart mobile devices to both consumers  and
   corporate users which would indicate that the potential boundaries between the smart mobile devices used exclusively by  corporate  users  and
   those used by consumers are blurring.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

14) In its decision in Google/Motorola,[7] the Commission took the view that basic and feature phones may not fall into the same  product  market
   as smartphones. As to the existence of a single market for smart mobile devices, the market investigation  in  the  Google/Motorola  case  was
   inconclusive, but suggested a difference in size and functionalities between these products. Ultimately,  however,  the  Commission  left  the
   exact product market definition open.

15) The data gathered during the market investigation in this case indicated that basic and feature phones, on the one  hand,  and  smart  mobile
   devices, on the other hand, belong to separate product markets.[8] Market participants indicated that these  products  are  not  substitutable
   from the demand-side, because, among other reasons, when compared to smart mobile  devices,  basic  and  feature  phones  have  less  advanced
   hardware components and connectivity services, and offer a limited choice of downloadable applications.

16) As regards the question whether there is a single market for smartphones and tablets, the results of the market investigation  in  this  case
   were mixed. On the one hand, a large majority of the market players indicated that smartphones and tablets are comparable to  one  another  in
   terms of technical characteristics (OS, hardware requirements) and for certain functionalities (web browsing, email access,  watching  videos,
   games, maps, etc.). On the other hand, a number of market participants indicated that there may not be demand-side  substitution  between  the
   two types of devices.[9] From the customers’ point of view, smartphones offer certain functionalities that tablets do not offer (for  example,
   the ability to make a telephone call), while tablets, due to their larger screen size, may be better suited than smartphones  for  other  uses
   (for example, watching long videos, reading books or newspapers and/or extensive work sessions).

17) Finally, a number of market players noted that certain smart mobile devices are more suitable  for  corporate  use  than  others  because  of
   design features (such as a physical keyboard) or their ability to securely access the corporate networks and mail  systems.[10]  However,  the
   market investigation also supported the Notifying Party's argument that most smart mobile devices can be customised for secure  corporate  use
   ("BYOD" policy).

18) The Commission considers that, for the reasons set out in paragraph (15) above, there are strong indications that basic  and  feature  phones
   are not part of the same product market as smart mobile phones. The Commission therefore concludes that basic and feature phones, on  the  one
   hand, and smart mobile devices, on the other hand, belong to separate product markets.

19) Regarding smart mobile devices both for consumer and corporate users, the Commission considers that, while from  a  supply–side  perspective,
   there are a number of similarities in  functionality  and  characteristics  between  tablet  devices  and  smart  mobile  phones,  demand-side
   considerations may indicate the two types of devices belong to separate product markets.

20) With respect specifically to smart mobile devices for corporate users, the Commission takes the view that, whereas some mobile  devices  have
   physical characteristics and security features considered important by corporate users, the greater number of  smart  mobile  devices  can  be
   customized in order to meet the specific requirements of business users.

21) In any event, for the purposes of the present case, whether smartphone and tablets belong to the same product  market  and  whether  separate
   product market(s) for smart mobile devices for consumer and corporate use should be identified, can be left open as the  proposed  transaction
   does not raise competitive concerns under any alternative product market definition considered.

2 Mobile OSs

22) Modern smart mobile device OSs combine the features of a personal computer  OS,  such  as  a  file  system  and  an  application  programming
   interface, with access to the hardware capabilities of a smart mobile device such as touchscreen, cellular  coverage,  Bluetooth,  Wi-Fi,  GPS
   mobile navigation, camera, video camera, speech recognition, voice recorder, music player, near  field  communication,  and  personal  digital
   assistant (PDA). While some of the features of a smart mobile device are not dependent upon a technical interface with the mobile  OS,  others
   require a more substantial technical interface with that OS. Moreover, certain performance characteristics such as speed and available  memory
   are at least partially influenced by the quality of the mobile OS. Therefore the mobile OS is a central part of a smart mobile device.

1 View of the Notifying Party

23) Microsoft notes that there is a convergence between OSs for PCs and OSs for smartphones and  tablets,  that  is  driven  by  increasing  user
   demand for a similar user experience whether using a PC, smartphone or tablet.

24) Microsoft submits that OSs for feature and basic mobile phones fall into a distinct market that is not part of the market for OSs  for  smart
   mobile devices. Microsoft notes that mobile applications represent a significant portion of the average daily usage of  smart  mobile  devices
   and that mobile applications for smart mobile devices are typically built on, and take advantage of, OS functionalities exposed  through  APIs
   (Application Programming Interface). OSs for feature and basic mobile phones generally do not include sophisticated APIs.

25) Microsoft further submits that the competitive assessment of the proposed transaction does not depend on whether mobile OSs  for  smartphones
   and mobile OSs for tablets form part of the same relevant product market, and in particular that, for purposes of this transaction, the market
   definition may be left open as there are no competition concerns in any case.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

26) In the Google/Motorola case, the market investigation provided strong indications that : (a) mobile OSs are distinct from PC OSs; (b)  mobile
   OSs for smart mobile devices are distinct from mobile OSs for basic mobile phone devices; and (c) mobile OSs for smartphones and  tablets  are
   part of the same market.[11] However, the exact scope of the product market definition, and specifically, whether mobile OSs  for  smartphones
   and tablets belong to the same product market, was left open.

27) The Commission has no indication that, for purposes of the present transaction, the relevant market should be broadened to include PC OSs  or
   basic and feature phone OSs. While there may exist some convergence between OSs for smart mobile devices and OSs for PCs, they continue to use
   different hardware, have different performance capabilities and therefore  exhibit  limited  demand-side  substitutability.  Furthermore,  the
   information gathered during the market investigation indicated that OSs for basic and feature phones and OSs for smart mobile  devices  belong
   to separate product markets due to the fact that OSs for smart mobile devices take advantage of more powerful  hardware  and  must  support  a
   wider range of features including the availability of APIs, cloud capabilities, advanced video and graphics processing, and more powerful  and
   integrated third-party applications.[12] In addition, OSs for smart mobile devices are updated by their supplier on a frequent basis,  whereas
   basic and feature phone OSs readily installed on the device will only be "updated" by purchasing a new device.

28) A large majority of the respondents to the market investigation indicated that OSs for  smartphones  fall  into  the  same  relevant  product
   market as OSs for tablets due to the similar hardware capabilities and OS functionality requirements of the  smartphone  and  tablet  devices;
   indeed, certain OSs (Android and iOS) are designed and developed to run on both smartphones and tablets.[13]

29) As regards a possible segmentation of the market for OSs for smart mobile devices for consumer  and  corporate  users,  the  results  of  the
   market investigation suggest that such segmentation is not warranted.[14] The majority of respondents point out that  currently  there  is  no
   mobile OS for which a significant number of corporate users would have a clear preference.  In  particular,  all  existing  mobile  OSs  offer
   similar functionality in terms of security, remote management and interoperability with the existing  enterprise  IT  infrastructure,  and  in
   particular Microsoft Exchange Server and the Microsoft Office suite of applications.

30) In any event, the Commission considers that for the purposes of the present case, the exact scope  of  the  product  market  definition,  and
   specifically, whether mobile OSs for smartphones and mobile OSs for tablets belong to the same product market, and whether there is a separate
   market for OSs for smart mobile devices for consumer and corporate users, can be  left  open  as  the  proposed  transaction  does  not  raise
   competitive concerns under any alternative product market definition considered.

3 Apps for smart mobile devices

31) The Commission has investigated whether a distinction should be drawn between apps for smartphones and apps for tablets.

32) The information gathered during the market investigation indicated that apps for tablets are comparable in terms of  features,  functionality
   and price with those for smartphones.[15] Some respondents pointed out that, while most apps are developed for both types of devices, some  of
   them are customised or configured differently because of the size of the device (smartphone or tablet).[16] These differences in configuration
   are likely to lose their importance. Some respondents submitted that apps developers create apps,  which  are  designed  to  operate  both  on
   smartphones and tablets in case they run the same OS. Moreover, as indicated in paragraph (28) above, OSs running on smartphones  and  tablets
   provide similar capabilities and use similar hardware configurations.

33) In any event, the Commission considers that for the purposes of this decision, the exact scope of the market definition can be left  open  as
   the proposed transaction does not raise competitive concerns under any alternative product market definition considered.

1 Consumer communication services for smart mobile devices ("communication apps")

1 View of the Notifying Party

34) Microsoft submits that the market for  consumer  communication  services  includes  all  apps  that  offer  some  or  all  of  the  following
   functionalities: Instant Messaging (“IM”) & presence, group IM chat, Voice  over  Internet  protocol  (“VoIP”),  (“public  switched  telephone
   network”) PSTN / VoIP, voice mail / video messaging, audio conferencing, video conferencing, document / photo sharing, email, SMS.

35) Microsoft also argues that consumer communication services are  evolving  rapidly,  such  that  it  has  become  increasingly  artificial  to
   distinguish individual communication functionalities. Users also have different views as to what  constitutes  "core  functionalities".  Users
   also switch easily and quickly between the three main types of services (IM, VoIP  calls  and  video  calls)  during  a  single  communication
   session.

36) Microsoft further submits that there is a single market for consumer communication services running  on  all  mobile  OSs,  as  an  important
   number of communication services are running on multiple mobile OSs.[17]

2 Previous Commission decisions, results of the market investigation and Commission's assessment

37) In its Microsoft/ Skype decision[18], the Commission identified a separate market for consumer communication services, but left open  whether
   the market needed to be further segmented such as by platform or by OS.

38) First, the Commission considered that consumer communication  services  should  not  be  distinguished  according  to  functionality  because
   consumers increasingly demand a user experience that integrates a range of communication functionalities (for example instant messages,  voice
   calls and video calls). The Commission also noted that most providers offer the whole range of functionalities.

39) Second, as regards a possible segmentation by platform (for  example  PCs,  smartphones,  tablets,  gaming  consoles  and  televisions),  the
   Commission observed that consumer communication services are different in terms of features and quality on the different types  of  platforms,
   and that not all platforms were available to all EEA customers, making widespread substitution difficult.

40) Third, as regards a possible segmentation by OS, the Commission observed limited cross-OS availability, and noted that it was impossible  for
   all consumers to switch between all existing consumer communication services because  the  choice  was  technically  limited  by  the  options
   available for the OS installed on the device.

41) Respondents to the market investigation in the present case pointed out that, while consumer communication apps are generally  comparable  to
   other apps (in terms of size, feature sets designed specifically for smart  device  form  factors),  their  intended  use  (for  communication
   purposes) and functionalities makes them different from other apps.[19] For instance, in terms of functionalities, communication apps  require
   the ability to input text accurately, allow for voice calls, and require enough screen space and a graphical user interface  (GUI)  for  video
   calls. While consumer communication apps may therefore be separate from other types of apps, consistent with its findings in  Microsoft/Skype,
   in the present case the Commission has no indication that the possible market for consumer communication apps should be further  distinguished
   by functionality.

42) As regards a possible distinction by platform between smart mobile devices and desktops/laptops, the information gathered during  the  market
   investigation was mixed.[20] While a majority of respondents consider that communication apps are comparable to  those  for  desktops/laptops,
   pointing out that the functionalities they offer are similar, others indicated that certain communication apps, in particular those supporting
   video calls, perform better when running on PCs. Other respondents argued that some consumer communication apps are  optimised  for  on-the-go
   situations in terms of functionalities and quality, but the basic functions and intended use remain the same.

43) For the reasons set out in its past decision in Microsoft/Skype, and in light of the responses to the market investigation in this case,  the
   Commission considers that there are indications that there may be a separate market for consumer communication apps, which could be  segmented
   by platform.

44) In addition, regarding a possible segmentation by OS, the Commission observes that  currently  a  number  of  communication  apps  supporting
   instant messaging (IM)[21], voice calls (VoIP)[22] and video calls,[23] as well as other functionalities, are  available  for  downloading  on
   various mobile OSs (Skype, ChatON, Fring, Facebook, ooVoo, Google Hangouts, Nimbuzz, Tango, Yahoo). A limited number of apps  remain  confined
   to the OS developer's proprietary OS, such as Apple Facetime. Nevertheless, other consumer apps may be downloaded  on  iOS,  including  Google
   Hangouts, Skype, Yahoo, Tango, Nimbuzz, ooVoo and Fring.

45) In any event, however, for the purpose of the assessment of the present transaction, the exact scope of  the  relevant  market  for  consumer
   communication apps can be left open, as the proposed transaction does not raise competition concerns  under  any  alternative  product  market
   definition considered.

2 Productivity apps

1 View of the Notifying Party

46) Microsoft submits that productivity apps used on smart mobile devices (“mobile productivity apps”) cover  a  wide  range  of  functionalities
   including: (1) management and processing of documents, content and spreadsheets, (2) sharing of and collaboration on documents,  (3)  document
   navigation and search, (4) calendar management and synchronization, and (5) email. The list of functionalities continues to  expand,  due,  in
   particular, to the fact that mobile users seek to do more on the move – conferencing, document sharing, versioning document synchronization  –
   and often in real time.

47) Microsoft also submits that the mobile productivity  apps  are  distinct  from  productivity  apps  for  desktops  and  laptops.  Originally,
   productivity apps were PC-based. Mobile productivity apps have been developed  more  recently,  and  offer,  in  general,  a  lower  level  of
   functionality compared to the feature set offered by productivity apps used on desktops and laptops.

48) Microsoft further claims that the market for mobile productivity apps should not be segmented according to functionality, as  most  of  these
   apps provide users some or all of the traditional productivity functionalities. Moreover, from the user's point of view, further  segmentation
   by functionality would not reflect the nature of the demand or the way mobile productivity apps are used.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

49) In Oracle/PeopleSoft,[24] the Commission noted that the market for business software applications  can  be  generally  be  divided  into  (i)
   personal productivity applications (such as word processing, spread sheets and client-side collaborative applications);  and  (ii)  enterprise
   application software. However, the Commission’s analysis in that case focussed on the enterprise application software market and the  personal
   productivity applications market was not further discussed.

50) The large majority of respondents to the market investigation in this case provided indications that, due to their different  characteristics
   and intended use (generally for business use), mobile productivity apps are distinct from other types of apps for  smart  mobile  devices.[25]
   Other differences pointed out by the respondents were that mobile productivity apps require synchronisation with other  material  produced  by
   the user. Moreover, suppliers (app developers) of mobile productivity apps are often specialised in the development of this specific  type  of
   apps and customers for mobile productivity apps typically do not consider them substitutable with  apps  offering  different  functionalities.
   Some market players also pointed out that the price of mobile productivity apps tends to be higher than for other smart mobile apps.

51) The large majority of respondents to  the  market  investigation  also  indicated  that  mobile  productivity  apps  are  not  comparable  to
   productivity apps for PCs (desktop and laptops),[26] as the former, at least at present, have fewer features, provide less  functionality  and
   are less user-friendly than the latter. In terms of functionality, this is particularly relevant  for  spread  sheets  and  presentations.  As
   underlined by several respondents,  from  the  supply-side  perspective,  productivity  apps  for  PCs  are  written  for  different  hardware
   environments: developers write fully-featured productivity apps specifically for desktops and  laptops  to  take  advantage  of  their  faster
   processors, larger screens and also of the presence of a mouse and physical keyboard. From the demand point  of  view,  typically,  users  use
   their smart mobile devices mainly to read and check items or make small edits, and not for heavy and productive work over extended periods  of
   time (like writing long documents, draft reports etc.).

52) The data gathered during the market investigation further indicated that there are differences between the  core  functionalities  of  mobile
   productivity apps for consumer and corporate users. In the case of consumer users, these functionalities are often more limited (for  example,
   email and calendar synchronisation),[27] while, in the case of corporate  users,  these  functionalities  generally  include  task  management
   features, document and spreadsheet processing, PDF reading, collaboration and presentation tools.[28]

53) Data gathered from the market investigation also indicated that mobile productivity apps for corporate users are  different  as  compared  to
   those for consumer users,[29] because they require different characteristics  or  customisations  to  achieve  the  types  of  functionalities
   required in a business environment, including, on average, better security management and identity authentication features. A  corporate  user
   also requires apps that have a larger range of features, such as the ability to edit large documents and spreadsheets.

54) Finally, the market investigation provided inconclusive results[30] as to whether the same mobile  productivity  apps  are  available  across
   different mobile OSs. While a number of mobile productivity apps are available on different OSs, this is not the case for all such apps.

55) For the reasons set out in paragraphs (50) and (51) above, the Commission considers that  mobile  productivity  apps  constitute  a  separate
   relevant product market from other types of apps for smart mobile devices and a separate relevant product market from  productivity  apps  for
   desktops and laptops.

56) The Commission also considers that while mobile productivity apps for corporate users may constitute  a  separate  product  market,  for  the
   purposes of the assessment of the present transaction this question can be left open as the proposed transaction does  not  raise  competition
   concerns under any alternative product market definition considered. Equally, the Commission considers that, for the purpose of the assessment
   of the present transaction, the question whether the market for mobile product activity apps should  be  further  segmented  by  functionality
   and/or OS can be left open as the proposed transaction does not raise competition concerns under any  alternative  product  market  definition
   considered.

4 Mail server software and services

57) Smart mobile devices, mobile OSs and apps are vertically related to mail server software and services to the extent that the former make  use
   of the latter. Mail server software and services include a range of communications services,  such  as  email,  calendar,  contact,  and  task
   management, as well as other services, such as archiving and voicemail handling, to computing devices such as  smartphones,  tablets  and  PCs
   ("clients").

1 View of the Notifying Party

58) Microsoft submits that, from the perspective of an average corporate user, enterprise mail  server  software  and  services  are  a  distinct
   relevant product market from consumer email services (although there may be exceptions relating to particularly small businesses that  do  not
   need the features of an enterprise-class mail server or service). Different characteristics and functionalities of enterprise  mail  solutions
   include enhanced security protections, advanced and customizable administrative controls (such  as  user  account  management),  sophisticated
   domain and alias controls, group policy management, and in many cases, the ability to actively manage and remotely wipe-connected smart mobile
   devices (particularly in the event that such a device is stolen or lost).

59) Moreover, Microsoft submits that there is a single relevant product market for enterprise mail server software  and  services  that  includes
   the following three segments: (1) on-premise enterprise mail servers; (2) infrastructure-as-a-service  ("IaaS")[31];  and  (3)  software-as-a-
   service ("SaaS")[32]. Microsoft submits that enterprise mail servers were historically deployed "on-premise" (in an enterprise's  data  centre
   or server room). Increasingly, they are being offered as "hosted" solutions through IaaS or SaaS.

60) According to Microsoft, on-premise mail server software, IaaS and SaaS are all part  of  the  same  market.  For  one,  from  a  demand  side
   perspective, adoption of IaaS and SaaS solutions is growing across all businesses (including large businesses). According to Microsoft's data,
   large business' adoption of Microsoft’s hosted solution, in France, Germany and the UK, increased from […]%  of  its  enterprise  mail  server
   accounts in the first half of 2012 to […]% in the first half of  2013.  Second,  from  a  supply  side  perspective,  Microsoft  submits  that
   competition from hosted solutions has led providers of on-premise mail server software to reduce royalties and/or to increase functionality to
   users without commensurate royalty increases.

61) With respect to communication protocols, Microsoft submits that these are part of the relevant market for mail server software  and  services
   as there is no demand for them separate from the demand for mail server software and  services.  Conceptually,  communication  protocols  link
   mobile apps, mobile OSs and smart mobile devices to the upstream  relevant  product  market  for  mail  servers  and  services.  Communication
   protocols allow the synchronisation of email, calendar, contact, and/or task management. Users can access, retrieve and modify that data  with
   any compatible client application regardless of OS or smart mobile device. Any changes are stored on the central mail server and  synchronised
   across the variety of client applications available to the user.

62) Microsoft's mail  server  solution,  Microsoft  Exchange  Server,  supports  a  number  of  industry  standard  communication  protocols  for
   synchronising information with clients. Internet Message Access Protocol v.4 ("IMAP") and Post Office Protocol v.3 ("POP3")  are  used  by  an
   email client to download emails from a mail server. The Simple Mail Transfer Protocol ("SMTP") is used by an email client or an  email  server
   to deliver emails. Microsoft's proprietary EAS protocol, in addition to sending and  receiving  emails,  allows  for  the  synchronisation  of
   calendar, contacts, tasks, remote wiping of a smart mobile device and a variety of other security focused features (like remote  disabling  of
   smartphone functions). Microsoft's proprietary Exchange Web Services protocol ("EWS") is primarily designed for use with "full-featured" email
   clients, not mobile email clients.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

63) The Commission has not considered the market for mail server software and services and its possible segmentation in any merger decision.

64) The vast majority of respondents to the market investigation in this case considered that enterprise mail server software  and  services  are
   distinct from consumer email software and services.[33] Consumer-focused products generally have less functionality and cost less.  Enterprise
   mail server solutions provide, in particular, enhanced security protection, risk management (business  continuity,  mobile  device  management
   including remote wipe function, device quarantining), compliance measures,  (eDiscovery,  retention  policy  enforcement)  and  customisation/
   integration with other corporate services and infrastructure.

65) As to a possible segmentation of enterprise mail server software and  services,  the  data  gathered  during  the  market  investigation  was
   inconclusive as to whether IaaS  solutions  are  comparable  to  on-premise  enterprise  mail  server  software.[34]  Potential  security  and
   confidentiality concerns were put forward as reasons that larger corporate users do not perceive IaaS as an appropriate substitute.  A  number
   of respondents considered that functionality and availability of service is comparable  between  on-premise  solutions  and  IaaS,  with  IaaS
   potentially having a lower total cost of ownership (in particular for small and  medium-sized  organisations).  However,  several  respondents
   pointed out that customers may not perceive hosted solutions as sufficiently secure (with  respect  to  third  party  access  to  confidential
   information/business secrets) given the lack of direct control over the servers. Moreover, IaaS would not generally allow the  same  level  of
   integration into the corporate network.

66) As regards SaaS (or "cloud") mail services, a majority of respondents to the market investigation  did  not  perceive  SaaS  as  meeting,  at
   present, corporate needs (such as regarding security  and  confidentiality  of  data,  compliance,  and  integration  with  corporate  network
   infrastructure) in a way that makes them substitutable with on-premise Enterprise services.[35] On the other hand,  one  smart  mobile  device
   manufacturer considered that "SaaS mail services typically have a smaller set of advanced features and can be positioned in  between  consumer
   email services and enterprise-class email server software in terms of capability", and notes that organisations that do not need the full  set
   of sophisticated capabilities may well regard them as a sufficient substitute.[36] A number of  the  respondents  that  shared  this  view  in
   principle considered, however, however, that substitutability ultimately depends on the precise services offered by a SaaS provider.

67) For the reasons set out in paragraph (64) above, the Commission considers that enterprise mail server  software  and  services  constitute  a
   separate product market from consumer mail server software and services.

68) As to a possible segmentation of the market for enterprise mail server software and services, this can be left open in the case at  hand,  as
   the proposed transaction does not raise competition concerns under any alternative product market definition considered.

2 Relevant geographic markets

1 Smart mobile devices (smartphones and tablets)

1 View of the Notifying Party

69) Microsoft submits that the market for smart mobile devices and its possible sub-segments at least EEA-wide, if not worldwide,  in  scope.  In
   support of this, Microsoft notes that smart mobile devices are manufactured on a global scale and shipped worldwide  with  low  transportation
   costs. The same devices are marketed at similar price levels throughout the world.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

70) In previous Commission decisions, the Commission considered that the relevant geographic market for smart mobile devices was  at  least  EEA-
   wide, if not worldwide, in scope.[37]

71) In the present case, the vast majority of respondents to the market investigation considered that the sale of smartphones and  tablets  takes
   place at a worldwide level, as device manufacturers distribute essentially the same devices both in terms of hardware characteristics  and  of
   software technologies to all their customers regardless of their geographical location.[38] There  are  no  major  price  differences  between
   countries and transportation costs are low, allowing globally manufactured products to be shipped worldwide. Respondents also considered  that
   existing regional differences in cellular standards are not a barrier as most devices support multiple bands within the same cellular standard
   and even operate on multiple cellular standards in order to facilitate consumer roaming. Similarly, most of  the  respondents  to  the  market
   investigation do not specifically mention IP rights as barrier to the worldwide trade of these products.

72) The Commission considers that while the geographic scope of the relevant market may be at least EEA-wide, if  not  worldwide,  this  question
   can be left open as the proposed transaction  does  not  raise  competition  concerns  under  any  alternative  geographic  market  definition
   considered.

2 OSs for smart mobile devices

1 View of the Notifying Party

73) Microsoft submits that the relevant geographic market for OSs for smart mobile devices is at least EEA-wide, if not worldwide, in  scope.  In
   support of this Microsoft notes that the objective conditions for competition are essentially the same worldwide, that  OEMs  generally  enter
   into a single worldwide licensing agreement with the OS provider, and that import restrictions, transport costs and technical requirements  do
   not represent significant limitations. Microsoft submits that, while there are certain language-specific  demand  characteristics  related  to
   mobile OSs, these do not constitute a significant obstacle to cross-border supplies.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

74) In the Google/Motorola decision,[39] the Commission found that the relevant geographic market for OSs for smart mobile devices was  at  least
   EEA-wide, if not worldwide, in scope.

75) The data gathered during the market investigation supports the existence of worldwide markets for  mobile  OSs  (and  the  possible  relevant
   segments). Notably, the market investigation indicated that there are no meaningful differences between OSs in different parts  of  the  world
   and that manufacturers of smart mobile devices typically conclude worldwide licensing agreements with mobile OS providers.

76) The Commission considers that while the geographic scope of the relevant market for OSs for smart mobile devices may be  at  least  EEA-wide,
   if not worldwide, this question can be left open as the proposed transaction  does  not  raise  competition  concerns  under  any  alternative
   geographic market definition considered.

3 Consumer communication services and mobile productivity apps

1 View of the Notifying Party

77) Microsoft submits that the markets for consumer communication services and for mobile productivity apps are both at least  EEA-wide,  if  not
   worldwide, in scope. Competitive conditions are essentially the same all over the world; apps  and  service  developers  distribute  the  same
   products to all their customers regardless of their geographic location; and prices are  similar  for  the  same  products  offered  globally.
   Moreover, while there are certain language-specific demand characteristics, these do not constitute a  significant  obstacle  to  cross-border
   supplies.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

78) In its Microsoft/Skype[40] decision, the Commission considered that the market for consumer communication services  was  at  least  EEA-wide,
   but ultimately left open the exact scope of the geographic market.

79) By contrast, the Commission has not previously considered the market for productivity apps and its possible segmentation.

80) The market investigation supports the existence of worldwide markets for consumer communication services and  for  mobile  productivity  apps
   (and their possible relevant sub-segments), albeit that a limited number of respondents pointed out that, while apps are offered on the global
   market, the demand for such services and apps may vary depending on divergent cultural interests or language.

81) The Commission considers that while the geographic scope of  the  relevant  markets  for  consumer  communication  services  and  for  mobile
   productivity apps may be at least EEA-wide, if not worldwide, this question can be left open  as  the  proposed  transaction  does  not  raise
   competition concerns under any alternative geographic market definition considered.

4 Enterprise mail server software and services

1 View of the Notifying Party

82) Microsoft submits that the market for enterprise mail server software and  services  is  at  least  EEA-wide,  if  not  worldwide  in  scope.
   Microsoft argues that email software services interoperate with email client and mobile software the same way globally and the  scope  of  the
   relevant licences and related agreements is also global.

2 Previous Commission decisions, results of the market investigation and Commission's assessment

83) Previous merger decisions by the Commission have not considered the market for enterprise mail server software and services and its  possible
   segmentation.

84) The vast majority of respondents to the market investigation considered that the main providers of enterprise mail  solutions  operate  on  a
   global basis and mail server software and functionalities, quality or price  do  not  differ  substantially  across  regions.  Licensing  mail
   enterprise server software also takes place on a worldwide scale.[41]

85) The Commission considers that while the geographic scope of the relevant market for enterprise mail server software and services  may  be  at
   least EEA-wide, if not worldwide, this question can be left open as the proposed transaction does not raise  competition  concerns  under  any
   alternative geographic market definition considered.

2 Competitive assessment

86) There are a number of limited horizontal overlaps between the activities of the Parties on certain of the possible relevant  markets  in  the
   manufacturing and supply of smart mobile devices.

87) There are also non-horizontal links between the Parties, in particular, between: (1) Microsoft's activities in the developing  and  licensing
   of OSs for smart mobile devices and the activities of the D&S Business relating to smart mobile devices; (2)  Microsoft's  activities  in  the
   developing and licensing of apps for smart mobile devices and the activities of the  D&S  Business  relating  to  smart  mobile  devices;  (3)
   Microsoft's activities in the developing and licensing of mail server communication protocols enabling  interoperability  between  Microsoft's
   mail server software and the activities of the D&S Business in relation to smart mobile devices.

1 Assessment of horizontal overlaps

88) The proposed transaction results in a horizontal overlap between the Parties' activities on a possible  market  comprising  the  development,
   manufacturing and sale of both smartphones and tablets. However, even on such a market, the proposed transaction would not give  rise  to  any
   affected markets, as the Parties' combined share in 2012 did not exceed 15% at both EEA and worldwide level.

89) The proposed transaction also results in a horizontal overlap between the Parties' activities on a possible  market  for  tablets.  Microsoft
   supplies the "Surface" tablet, while Nokia announced in October 2013 the release of its first tablet, named "Lumia 2520", which is supposed to
   be shipped before the end of 2013 (and will form part of the D&S Business). However, in light of Microsoft's limited share in this segment ([0-
   5]% at both EEA and worldwide level), and the uncertainty as to the future success of the D&S Business' product, the proposed transaction does
   not give rise to competition concerns in this possible market segment.

90) Respondents to the market investigation have  not  expressed  any  concerns  as  regards  a  possible  significant  impediment  to  effective
   competition arising from horizontal overlaps between the activities of the Parties.

91) In light of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with  the
   internal market as a result of horizontal overlaps between the activities of the Parties.

2 Assessment of non-horizontal links

92) The Commission has investigated three possible ways in which the transaction may give rise to serious doubts due to the non-horizontal  links
   between the activities of the Parties. They relate to Microsoft's possible ability and incentive to foreclose  competing  providers  of  smart
   mobile devices (also referred to as Original Equipment Manufacturers, or "OEMs") by restricting access to: (1) its mobile OS, (2) its apps and
   (3) its licenses to patents of communication protocols enabling interoperability between Microsoft's mail server software and competing  smart
   mobile devices.[42]

93) According to the Non-Horizontal Merger Guidelines, in order to be able to foreclose competitors, the vertically integrating firm must have  a
   significant degree of market power in the upstream market.[43] Furthermore, if there remains sufficient credible downstream competitors  whose
   costs are not likely to be raised, for example because they are themselves vertically integrated or they are capable of switching to  adequate
   alternative inputs, competition from those firms may constitute a sufficient constraint on the merged  entity  and  therefore  prevent  output
   prices from rising above pre-merger levels.[44] Competition concerns in non-horizontal mergers are  therefore  unlikely  to  arise  where  the
   market share post-transaction of the new entity in each of the markets concerned is below 30%.[45]

94) For completeness, the Commission has also investigated whether, as claimed by certain respondents to the market investigation,  the  proposed
   transaction will strengthen the merged entity's upstream position with  respect  to  its  patent  portfolio  for  smart  mobile  devices.  The
   Commission considers that this is not the case. Under the proposed transaction, Microsoft acquires only non-SEPs  that  read  on  the  devices
   being produced by the D&S Business. According to Nokia, these patents are mostly design patents  (so  called  “look  and  feel”  patents)  and
   [information concerning pre-concentration licensing of these patents]. Apart from these non-SEPs, there is no increase in  Microsoft's  patent
   portfolio. On the contrary, Microsoft's exposure to third party IP rights is likely to increase post-transaction because,  once  the  existing
   licensing agreements that Nokia has entered into with third-parties relating to the D&S Business expire, Microsoft will need  to  renew  these
   agreements, without, however, being able to cross-license the SEPs which Nokia typically offered to cross-license as part of  the  negotiation
   and which Nokia will retain post-transaction. For these reasons, the possibility that the proposed transaction strengthens the merged entity's
   upstream position with respect to its non-SEP portfolio for smart mobile devices can be discarded.

1  Input foreclosure by restricting the supply of Microsoft’s Windows OSs for smart mobile devices

95) Post transaction, Microsoft will become a vertically integrated producer of smart mobile  devices.  The  Commission  has  therefore  assessed
   whether the transaction raises serious doubts as to its compatibility with the common market due to the fact that the merged entity  may  have
   the ability and incentive to foreclose or degrade the access of other smart mobile device manufacturers to its Windows  OSs,  notably  Windows
   Phone, Windows RT and Windows 8.

96) In undertaking such an assessment, the Commission has examined whether, post-transaction: (i) the merged entity would  have  the  ability  to
   substantially foreclose access; (ii) the merged entity would have the incentive to do so; and whether (iii) a foreclosure strategy would  have
   effects downstream.[46] These aspects are usually analysed together.[47]

1 View of the Notifying Party

97) With regard to its ability to foreclose access to its Windows OSs, Microsoft submits that, in 2012, its share of the market  for  mobile  OSs
   for smart mobile devices was no more than [0-5]% in the EEA and no more than [0-5]% worldwide (regardless of whether OSs for  smartphones  and
   tablets are viewed as part of the same market or separately). Android and iOS represented respectively 71% and  19%,  of  worldwide  share  of
   supply of OSs to smartphones (respectively 67% and 21% in the EEA,), with Blackberry and Linux having respectively shares of 5% and  2%  on  a
   worldwide smartphone OS market.

98) With regard to its incentive to refuse to supply or to degrade the quality of its Windows  OSs,  Microsoft  submits  that  the  smart  mobile
   device business model depends upon the mobile apps of developers who are ultimately attracted to the mobile OSs with the  largest  user  base.
   The majority of Windows OS devices sold today are made by OEMs. If Microsoft refused to supply, or degraded the performance of, its mobile OSs
   to competing smart mobile device manufacturers, it would hamper the growth of its user base. This would in turn discourage the development  of
   mobile apps for its OSs, and ultimately weaken the competitiveness of its offering.

99) With regard to the effect on competition of Microsoft's conduct, Microsoft notes that  the  market  share  of  third  party  devices  running
   Microsoft’s mobile OSs in the downstream market for smart mobile devices was no more than [0-5]%  both  in  the  EEA  and  worldwide  in  2012
   (regardless of whether smartphones and tablets are viewed as part of the same market or separately).

2 Results of the market investigation and the Commission's assessment

100) A limited number of respondents to the market investigation submit that Microsoft may have the  incentive  to  stop  licensing,  or  license
   inferior versions of its mobile OSs and to favour its own downstream business.[48]

101) The Commission disagrees, however, for the following reasons.

102) First, the Commission notes that the merged entity will not  have  the  required  market  power  to  engage  in  any  foreclosure  strategy.
   Microsoft's 2012 share of supply of OSs for smart mobile devices, for smartphones and for tablets was less than [0-5]% both  in  the  EEA  and
   worldwide. Even in a possible market segment that excludes mobile OSs that are not licensed to OEMs, where Android was  in  2012  by  far  the
   dominant OS with upwards of 80-90% of the market, depending on the segment, Microsoft's market 2012 share did not exceed [5-10]%.  On  such  a
   market, Android was by far the dominant OS, with a 2012 share of more than 80-90% of the market. In addition, there appear to be  several  new
   entrants in the relevant market for OSs (whose products are available to third party OEMs), including Firefox OS and Sailfish OS.

103) Second, the Commission considers that the merged entity will not  have  the  incentive  to  engage  in  any  foreclosure  conduct  as  post-
   transaction (as was already the case pre-transaction), Microsoft will have the incentive to license its Windows OSs as broadly as possible  to
   increase its user share with both OEMs and app developers. For Microsoft to credibly compete with iOS  and  Android,  it  will  need  to  both
   increase the number of apps available for its mobile OS and ensure broad consumer adoption of  Windows  OS  devices.  In  addition,  in  2012,
   Microsoft's own tablets running Windows OS represented only a [20-30]% share worldwide, and a [5-10]% share in the EEA of all the  Windows  OS
   tablets sold. Microsoft is therefore likely to continue to compete for the business of third-party OEMs rather than cede it to Android.

104) In that regard, the majority of respondents to the market investigation, including a number of OEMs currently licensing  Microsoft’s  mobile
   OSs, considered that such a strategy would not make business sense for Microsoft.[49] Moreover, the majority  of  respondents  to  the  market
   investigation confirmed that a mobile OS is an important element of the commercial and technical success of a smart mobile device[50] and that
   consumer preferences for a smart mobile device depend on the attractiveness of the mobile platform as a whole, of which the  OS  is  just  one
   part. In particular, respondents indicated that the quality and breadth of available mobile apps carry a greater weight.[51] This, in turn, is
   driven by the mobile OS developer's support of mobile app developers and the size of the mobile OSs' user base.

105) Third, the Commission considers that, even if Microsoft were to put in place such a strategy, it would not lead to the  foreclosure  of  the
   merged entity’s competitors due to: (i) the limited market share of third party devices running  Microsoft’s  mobile  OSs  in  the  downstream
   market for smart mobile devices; (ii) the fact that the majority of respondents to the market investigation have indicated that,  at  present,
   the Windows mobile OS does not have significant advantages as compared to other  mobile  OSs;[52]  and  (iii)  the  ability  of  licensees  of
   Microsoft’s OSs to easily switch to competing OS providers, such as Android. Indeed, all OEMs other than Nokia that responded  to  the  market
   investigation and currently license Windows Phone OS also develop and supply smart mobile devices using other mobile OSs.[53] Accordingly,  if
   Microsoft were to stop licensing, or start licensing only inferior versions of, its mobile OSs, these OEMs could switch to  the  other  mobile
   OSs they already use.

106) Finally, the Commission notes that, from a consumer perspective, the development of a third platform in the mobile space in addition to  iOS
   and Android would be pro-competitive as it would result in greater choice for end-users.

107) Based on the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its  compatibility  with  the
   common market as the merged entity will not have the ability and incentive to foreclose or degrading the access of other smart  mobile  device
   manufacturers to its mobile OSs.

2 Input foreclosure by restricting the supply of Skype and/or Office Mobile apps

108) Microsoft supplies several mobile apps including Skype and Office for smart mobile devices. The Commission has  therefore  assessed  whether
   the transaction raises serious doubts as to its compatibility with the common market due to the fact that  the  merged  entity  may  have  the
   ability and incentive to foreclose or degrade access of other smart mobile device manufacturers to these mobile apps.

1 Skype

109) Skype is a consumer communication service[54] which enables IM, voice and video communications, as well as  other  functionalities  such  as
   PSTN calls, audio and videoconferencing.

1 View of the Notifying Party

110) Microsoft submits that Skype is not a "must have" mobile app. First, Microsoft estimates that Skype's share by mobile  OS  in  all  consumer
   communication services (including all functionalities), measured as a proxy by downloads from the relevant mobile app  stores  between  August
   and October 2013, is [10-20]%  for Android and [10-20]% for iOS (calculated as the proportion of  total  downloads  of  the  top  25  consumer
   communications apps). As to possible segments of the market for mobile communication apps, Microsoft estimates that Skype has a [30-40]% world-
   wide market share on the possible segment for video calling mobile apps, [10-20]% for VoIP call apps and [0-5]%for IM mobile apps.

111) Second, Microsoft argues that there are a number of other providers of mobile communication apps that  offer  the  same  functionalities  as
   Skype. These include Google Hangouts, Yahoo!, Fring, Apple Facetime (on iOS devices) and ooVoo. In 2012, Apple's Facetime (available  only  on
   iOS) had a [20-30]% market share in video calls (only available on iOS), followed by Google Hangouts ([5-10]%), WeChat ([5-10]%),  Tango  ([5-
   10]%) and ooVoo ([0-5]%). As regards Instant Messaging (IM) Skype's  2012  share  was  [0-5]%  (across  all  OSs).  Microsoft  estimates  that
   Whatsapp's 2012 share was [20-30]%, followed by KakaoTalk ([10-20]%) and iMessage ([5-10]%). In terms of VoIP calls, Skype's  2012  share  was
   [10-20]% across all OSs, approximately half of Viber's [20-30]% market share in this segment.

112) Third, Microsoft submits that there is no switching cost for consumers when it comes to mobile communication apps, since the  vast  majority
   are free-of-charge. Microsoft notes also that there has been significant  entry  in  the  mobile  consumer  communications  market  in  recent
   years.[55]

113) Fourth, Microsoft submits that the merged entity would not have the incentive to refuse to supply, or to degrade the performance  of  Skype,
   to competing smart mobile device manufacturers. Given that Skype relies  on  interoperability  and  network  effects  for  its  success,  such
   foreclosure strategy would hamper the growth of Skype's user base and ultimately weaken its competitive offering. Users would  quickly  switch
   to competing mobile communication apps. Furthermore, Skype has been available on a cross-platform basis for several years, and Microsoft would
   have no incentive to lose users who have been using Skype across multiple devices.

2 Results of the market investigation and the Commission's assessment

114) As Microsoft will produce its own smart mobile devices post-transaction,  a  limited  number  of  market  players  expressed  concerns  that
   Microsoft may have higher incentives to restrict the supply of Skype to rival smart mobile device manufacturers or mobile OS  suppliers.  They
   submit that Skype is a "must-have" application and restricting access  to  Skype  for  users  of  handsets  running  other  mobile  OSs  would
   incentivise consumers to purchase the merged entity's smartphones and tablets.

115) The Commission disagrees, however, for the following reasons.

116) First, the Commission does not consider that Microsoft, via Skype, holds the necessary degree of market power to engage in  any  foreclosure
   conduct as Skype's market share on the market for mobile consumer communication apps providing video call functionalities across  all  OSs  is
   only [30-40]%. Based on available information, the Commission also considers that Skype's market share would not materially differ even  if  a
   possible market were to be segmented by OS. In all other possible relevant market segments, Skype’s share is below [30-40]%.

117) The information gathered during the market investigation also indicated that a number of other mobile communication apps closely compete  on
   this market. Respondents to the market investigation indicated as main competitors to Skype, Apple Facetime and iMessage  (available  only  on
   iOS), Google Hangouts, Yahoo, Fring and WeChat (all available across OSs).[56] Only a few  respondents  considered  Skype  as  a  "must  have"
   consumer app, and mentioned it together with other mobile communication apps, such as Apple  Facetime  (available  only  on  iOS),  Blackberry
   Messenger (available on only Blackberry OS), Facebook, Google Chat, Lync,  WhatsApp,  Twitter  and  WeChat  (all  available  across  on  OSs).
   Regarding the possible segment for corporate users, Skype, together with BlackBerry Messenger  and  WhatsApp,  was  mentioned  by  even  fewer
   respondents as a "must have" mobile communication app.[57]

118) Skype therefore does not appear to be a "must have" mobile communication app. Moreover, recent  entrants  on  the  market  have  managed  to
   attract an important number of users in a short time. For instance, Viber by Viber Media was launched in December 2010. In  2012,  it  already
   had a market share of approximately [20-30]% in the mobile VoIP calls segment. In May 2013 Viber announced that it  had  already  reached  200
   million users. According to Microsoft, Skype has 300 million active users.

119) Second, the Commission considers that Microsoft will not have the incentive to engage in the  foreclosure  conduct  described  in  paragraph
   (114) above.

120) This is confirmed by a majority of respondents to the market investigation which consider  that,  while  Microsoft's  future  strategy  with
   regard to Skype could be difficult to predict, it would not make business sense for Microsoft to stop licensing Skype to rival  device  and/or
   mobile OS suppliers[58]. The main reasons given by respondents included the need for Skype to achieve  growth,  and  the  fact  that  removing
   support for Skype would diminish the value of the mobile app and would hamper the development of a  competitive  Windows  platform  for  smart
   mobile devices. If anything, such strategy would entice users to switch to competing communication apps.

121) Given that the market share of the Windows OS for smartphones is less than [5-10]%, the market share for the OS for tablets is less than [0-
   5]%, and that Skype's client base depends on its inter-operability  with  different  OSs,  the  merged  entity  will  not  engage  in  such  a
   hypothetical foreclosure strategy as it would hamper the growth of Skype's user base, and ultimately weaken  the  competitiveness  of  Skype’s
   offerings.

122) Indeed, the majority of respondents to the market investigation also noted that users would switch to different  communication  apps  rather
   than acquire a new smart mobile device running a Windows OS.[59] Different communication apps are usually free of charge  or  inexpensive  and
   multiple mobile communications apps can be installed on the same device. Switching should not take  a  significant  amount  of  time,  as  the
   contact data that mobile communications apps rely on is frequently stored either on the smart mobile device itself, or  a  server  or  service
   that is accessible through the APIs of the mobile OS, or may be manually exported.

123) Third, in light of the non "must-have" nature of Skype as confirmed by the market investigation, as well as  the  ability  of  consumers  to
   switch to competing mobile communication apps, the Commission considers that any such possible foreclosure conduct, even if implemented, would
   not give rise to a significant impediment to effective competition.

124) Based on the above, the Commission concludes that the proposed transaction will not give rise to serious  doubts  as  to  its  compatibility
   with the common market due to the fact that the merged entity may have the ability and incentive to foreclose or degrade access of other smart
   mobile device manufacturers to these mobile apps.

2 Office suite for smart mobile devices

125) The Office suite for smart phone devices includes Word, Excel and PowerPoint and offers users the possibility to share and store  documents.
   On smartphones running Windows Phone OS, iOS and Android, the Office suite is known as Office Mobile. The Office suite[60] is  also  available
   on tablets running Windows 8, Windows 8.1 OS, Windows RT OS and the newly launched Nokia Lumia tablet. It is not, however, currently available
   on tablets running iOS or Android.

126) View of the Notifying Party

127) Microsoft submits, first, that Office Mobile is not a "must have" mobile app for either consumer users or corporate  users  of  smartphones.
   While it has not provided market shares Microsoft submits that the number of reported activations of Office Mobile on iOS  and  Android  (less
   than […] during the first trimester when it was released) suggests that it does not have a significant market share. To  put  this  figure  in
   context, 356 million iPhones had been sold by the end of March 2013[61], which means that less  than  [0-5]%of  iPhone  users  have  installed
   Office Mobile during the first ten weeks of its availability.

128) Second, with regard to Office suite on tablets, Microsoft submits that Office was pre-activated on approximately […] Windows RT  tablets  in
   2012, and that there were an additional […] Windows RT tablets sold in 2012 that were manufactured by  third  parties,  for  a  total  of  […]
   Windows RT tablets sold in 2012 (approximately […] of the total number of tablets sold by Microsoft in 2012[62]).

129) Third, Microsoft submits that other mobile productivity apps such as Apple Numbers, and Apple Pages (exclusively available on iOS),  Docs2Go
   (available on Android, iOS, Blackberry OS and Windows OS), Quick Office and Good Reader (both available on iOS and Android)  are  the  leading
   productivity apps for these mobile OSs and for corporate users in particular[63]. Moreover, Microsoft argues that the "consumerisation" of  IT
   has taken hold in enterprises and, as a result, users increasingly use their devices for both business and private purposes, using  apps  that
   are installed/ downloaded and activated for both purposes.

130) Fourth, Microsoft submits that, as a result of the dynamic character of mobile app markets, there are a significant number of new  entrants.
   Over the past five years, several players have begun to supply mobile productivity apps.[64]

131) As regards incentives, Microsoft submits, first, that the merged entity will have neither the incentive  to  refuse  to  supply  its  Office
   suite to competing smart mobile device manufacturers, nor to degrade its performance. For example, if Microsoft decides not to  supply  Office
   Mobile on competing mobile OSs, users will likely switch to competing mobile productivity apps such as Apple's iWork or Polaris Office, Google
   Drive, QuickOffice, Documents To Go or CloudOn.[65] Microsoft also submits that while certain mobile productivity apps  are  paid-for,  prices
   are not high and do not constitute a barrier to switching to a competing mobile productivity app.

132) Second, Microsoft notes that Office Mobile is a relatively recent entrant on the smartphone app market. Microsoft submits that it  has  only
   recently completed the development of its iOS and Android versions of Office Mobile. It will have every incentive  to  facilitate  the  widest
   possible adoption of its mobile productivity app in order to recuperate its development costs.

133) Finally, with regard to tablets running Windows OSs, Microsoft submits that there is no difference  in  the  availability  of  Office  suite
   between Microsoft and third-party devices, both for consumer and commercial uses, and it  has  no  incentive  to  restrict  third  party  OEMs
   producing Windows tablets access to Office, [information regarding Windows OS adoption]. Moreover,  Microsoft  has  every  incentive  to  make
   tablets using Windows OS as attractive as possible to customers choosing between tablets using Android, iOS and Windows,  and  to  incentivise
   OEMs to manufacture tablets using Windows OS instead of other OS, such as Android. Microsoft also notes that on Windows OS tablets,  a  number
   of other productivity apps are available such as Google Docs, Kingsoft Office Suite, Open Office, Suite Office, Zoho and SoftMaker  FreeOffice
   which offer office suites with word, spreadsheet and presentation processors and PDF viewers.

1 Results of the market investigation and the Commission's assessment

134) Concerns were raised during the market investigation regarding Microsoft's possible incentives and ability,  post-transaction,  to  restrict
   the access of rival device manufacturers and mobile OS suppliers to its Office suite on smart mobile devices in order to  position  its  smart
   mobile devices as the only devices capable of integrating the Office suite software.

135) The Commission disagrees, however, for the following reasons.

136) First, the Commission notes that Microsoft's Office suite for smart mobile devices does not confer upon Microsoft the  necessary  degree  of
   market power to successfully foreclose competing smart mobile device manufacturers and/or mobile OS vendors.

137) As regards smartphones, until June 2013, Office Mobile was available only for Windows Phone OS, less than [0-5]%  of  smartphone  users,[66]
   and Microsoft has only recently made Office Mobile available for iOS  (June  2013)  and  Android  smartphones  (July  2013).  Consistent  with
   Microsoft’s claims, the overall number of activations of Office Mobile reported between June and November 2013 point to a low market share (on
   iOS smartphones there have been […] activations of Office Mobile registered for both Android and  iOS  smartphones).[67]  In  comparison,  for
   instance, Google's productivity apps, including Google Drive (formerly known as Google Docs) are used by over 5 million businesses.[68]

138) Moreover, a majority of respondents to the market investigation did not  identify  any  "must  have"  mobile  productivity  apps  and,  more
   specifically, did not identify Office Mobile as a "must-have" mobile productivity app for smartphone users.[69] The non-"must-have" nature  of
   Office for smartphones is further confirmed by the fact that Office Mobile has so far had a low number of activations  on  Windows  Phone,  as
   well as on iOS and Android smartphones[70]. To put this further in context, IDC estimates that 171.2 million iOS and Android smartphones  were
   purchased in 2012 by employers or employees, which means that Office Mobile is activated on less than [0-5]% of smartphones sold for corporate
   users.

139) In addition, the market investigation identified the existence of several other competitors to Office Mobile  offering  mobile  productivity
   apps, such as Apple Numbers, Apple Pages, Google Drive, Quick Office and Polaris. Some of these apps are pre-installed by  the  OS  or  device
   supplier. These mobile productivity apps typically offer comparable features to Office  Mobile  including  word  and  spreadsheet  processing,
   presentations, PDF file viewer, collaboration tools and synchronisation. New entrants in 2013 include Quip (available for  iPhone,  iPads  and
   Android OS), Tempo and Doo[71] (including Android, iOS and OSx versions).

140) As regards tablets, the Office suite is currently available only on Microsoft's own Surface tablets, on the recently  launched  Nokia  Lumia
   tablet, and on tablets running Windows OS, which are produced by third party manufacturers.[72] Office suite on tablets was thus available  to
   less than [0-5]% of tablet users in the first two quarters of 2013 ([0-5]% of tablet users in 2012). The Office  suite  was  pre-activated  on
   approximately […] Windows tablets sold by third-party tablet manufacturers in 2012.

141) Second, the Commission considers that Microsoft will not have the incentive to engage in any such foreclosure conduct.

142) As regards smartphones, Microsoft is a new entrant on the mobile productivity app market  with  Office  Mobile  and  has  recently  made  it
   available on iOS and Android smartphones. Several other similar mobile productivity apps exist on the market and if Microsoft were  to  refuse
   to make Office Mobile available to competing smart mobile manufacturers, they could pre-install competing mobile apps (to the extent that they
   pre-install Office Mobile today) and/or users could switch to alternative mobile productivity apps. Given that Office Mobile is not considered
   a "must-have" mobile productivity app for smartphones, the Commission considers that Microsoft will have the incentive to make  Office  Mobile
   as widely available as possible. Moreover, given Nokia's limited presence in the smartphone market segment, the proposed transaction will  not
   increase the merged entity's incentives to stop supplying Office Mobile or to degrade its quality to competing smartphone manufacturers.

143) The same considerations apply to tablets. In addition, the Commission notes that,  pre-transaction,  Microsoft  Office  suite  is  currently
   available only on tablets running Microsoft’s Windows OSs. In other words, already today, neither Office  mobile  nor  any  other  version  of
   Office suite is available for tablets running non-Windows OSs. Given Nokia's extremely limited presence in the market segment for tablets, the
   Commission considers that the proposed transaction will not materially change the merged entity's incentives with respect  to  the  supply  of
   Office suite to tablet suppliers running non-Windows OSs.

144) Third, in light of the non-"must-have" nature of Microsoft’s Office suite on smartphones and tablets,  its  low  market  presence,  and  the
   number of alternative apps, the Commission considers that any foreclosure conduct, even if implemented, would not give rise to  a  significant
   impediment to effective competition.

145) Based on the above, the Commission concludes that the proposed transaction will not give rise to serious  doubts  as  to  its  compatibility
   with the common market due to the fact that the merged entity may have the ability and incentive to restrict the supply of mobile productivity
   apps.

3 Input foreclosure through restricting the licensing of Microsoft's Exchange Server communication protocol

146) Given the significant market share of Microsoft Exchange Server in the upstream  market  for  enterprise  mail  servers  and  services,  the
   Commission has assessed whether the transaction raises serious doubts as to its compatibility with the common market due to the fact that  the
   merged entity may have the ability and incentive to foreclose access to its proprietary communication protocol,  EAS,  in  order  to  increase
   sales of its own smart mobile devices. The Commission has undertaken its assessment for private consumers of smart mobile devices as  well  as
   users of enterprise mail server software and services and corporate smart mobile devices.

1 View of the Notifying Party

147) According to the notifying party, Microsoft Exchange Server has an insignificant  market  share  (close  to  [0-5]%)  among  consumer  email
   software and services. However, Microsoft Exchange Server is the leading enterprise messaging and  communication  server  software.  Microsoft
   estimates that its 2013 share on the overall enterprise mail servers and services market to be [50-60]% in the EEA and [30-40]% worldwide.[73]
   Its strongest competitors are Google ([5-10]% in the EEA, [10-20]% worldwide) and IBM/Notes ([0-5]% in the EEA and worldwide).

148) As regards possible segments, Microsoft estimates its 2013 share for a possible market comprising both on-premises mail server software  and
   IaaS to be [80-90]% in the EEA and [70-80]% worldwide. IBM/Notes would have an estimated share of [0-5]% both at EEA and worldwide level, with
   open source solutions estimated to have [0-5]% and [0-5]% respectively. Other mail server software would account  for  [10-20]%  and  [10-20]%
   respectively in this segment.[74] Microsoft is unable to provide data for on-premises and IaaS customers separately and hence does not provide
   market shares for the possible market for on-premises mail server software (without IaaS). It submits that it has no reason  to  believe  that
   its share in this possible market would be materially different when compared to its share of a market comprising both  on-premises  and  IaaS
   deployment of Exchange Server.

149) Microsoft submits that the ability to access  email,  calendar  and  contact  information  through  mail  servers  or  services  is  a  core
   functionality for smart mobile devices. The communication protocols EAS and EWS[75] allow smart mobile devices to communicate  with  Microsoft
   Exchange Server. They are proprietary technologies that are subject to Microsoft's patents. Microsoft,  however,  submits  that  it  currently
   licenses EAS to at least […] smart mobile device suppliers ("OEM device licences")[76] as well as at least […] mobile app  developers[77]  for
   use on various platforms and OSs. According to Microsoft, all major smart mobile device manufacturers are  currently  a  licensee  apart  from
   Motorola Mobility (“Motorola”) due to a patent dispute (see paragraph (157) below), and some smaller  (mainly  Chinese)  smart  mobile  device
   manufacturers.

150) Microsoft submits that it will not have the ability or incentive to foreclose access to its proprietary communication protocols in order  to
   increase sales of its own smart mobile devices.

151) As to its ability to foreclose, Microsoft submits, firstly,  that  its  EAS  device  licences  to  smart  mobile  device  manufacturers  are
   effectively licenses for [information regarding duration of licences] EAS patents ([…] out of […] EAS licences) and cover more  than  [80-90]%
   of smartphone units supplied in the EEA in the period 2010 to 2012, and between [60-70]% and [70-80]% of global smartphone supplies (excluding
   Nokia phones).[78]

152) […] OEM device licences provide that the licence continues [information regarding duration of licences].EAS  patents.  The  licence  to  […]
   continues for as long as […] continues to pay royalties to renew its licence. Only the licence to […] – which, however, is not […]  –  expires
   on […].

153) Second, Microsoft submits that all […] OEM device licences referred to in paragraph (151) above  explicitly  cover  [information  concerning
   application of licences to updated protocol documentation]. If licensees implement an update to the EAS protocol that would entail the use  of
   [information of licence to new EAS patents].

154) Third, Microsoft submits that all […] OEM device licences provide that any licensed device can connect [information concerning  versions  of
   Exchange Server]. That is because licenses are granted for use with services provided by [information concerning server  software  with  which
   EAS OEM licences can be used to establish connectivity].

155) Fourth, Microsoft submits that all existing OEM device licences to currently active suppliers (that is, […])  do  not  enable  Microsoft  to
   terminate the license for any reason other than: [information concerning the two circumstances in which Microsoft has  a  right  to  terminate
   licences].

156) Fifth, Microsoft submits that the OEM device licences do not allow it to unilaterally [information regarding amendment of licence terms].

157) Lastly, Microsoft submits that the transaction does not change Microsoft's ability or incentives to license EAS to Motorola.  Motorola  sued
   Microsoft for the infringement of several SEPs after negotiation over the renewal of its EAS licence  broke  down  and  after  Microsoft  sued
   Motorola for infringement of the EAS patents. The U.S. International Trade Commission found that Motorola infringed  an  EAS  patent  and  the
   resulting exclusion order became effective in July 2012. To date, Motorola and Microsoft have not  agreed  on  licensing  terms  for  the  EAS
   patents. Microsoft submits that the transaction will not alter the status quo ante between Microsoft and Motorola in these disputes  and  that
   it is not merger-specific as Microsoft has already sought and obtained an injunction against Motorola pre-merger.

158) As regards incentives, Microsoft submits that the popularity of Exchange  Server  in  enterprises  depends  critically  on  its  ability  to
   interoperate with client devices and mobile OSs that employees actually use. Given that over 90% of  smartphones  run  Android,  iOS  or  non-
   Microsoft mobile OSs, if Microsoft were to eliminate or degrade interoperability between its Exchange Server software and rival  smart  mobile
   devices, IT administrators would not replace 90% of the employees’ smartphone installed base – at several  hundred  euros  per  device  –  and
   impose Windows Phone (or tablet) devices on them. Instead, Exchange customers could react in a number of ways that would constrain Microsoft's
   incentives to pursue this hypothetical approach (assuming it had the ability to do so).

159) First, there are a number of alternative communication protocols to EAS and EWS that link  Microsoft  Exchange  Server  with  mobile  client
   applications and mobile OSs, such as IMAP and POP3 ("standard communications protocols").  In  order  for  the  hypothetical  strategy  to  be
   effective, Microsoft would need to stop supporting all other means of mobile device synchronisation  with  Exchange  Server,  including  these
   standard communications protocols.

160) Second, if enterprise customers were to switch from using Microsoft Exchange  Server  to  competing  suppliers  of  enterprise  mail  server
   software and services, Microsoft would lose significant licensing revenues (up to EUR […] billion globally, or […]% of its global turnover, in
   its latest financial year). This would serve as a deterrent for Microsoft to engage in such a foreclosure strategy.

161) Third, there are several rival mail server  software  and  service  providers  that  plug  into  and  interoperate  well  with  the  Windows
   architecture and can provide synchronisation with 95% of global smart mobile devices.

162) Fourth, 55% of its overall revenue is generated by enterprise customers and Microsoft would not jeopardize  its  overall  relationship  with
   those customers by incurring reputational damage and loss in enterprise customer goodwill. The hypothetical strategy would  also  [information
   regarding broader impact of strategy].

163) Lastly, few customers would stay with Exchange Server and switch their employees to Windows Phone. Due to the  BYOD  policy,  a  significant
   percentage of organisations do not control the smartphone devices that their employees use and therefore could not  force  an  enterprise-wide
   shift to Windows Phone. Those organisation that could force a shift would face significant costs given the cost of smartphone handsets (around
   an average of EUR 300 per device) – which would be more than the switching cost per mailbox to a competing mail server or service.

2 Results of the market investigation and the Commission's assessment

1 Consumer segment of smart mobile devices

164) The Commission considers that, given the low share (close to [0-5]%) of Microsoft Exchange Server in the market for consumer mail  services,
   the transaction does not raise serious doubts as to its compatibility with the common market with regards to the  consumer  segment  of  smart
   mobile devices.

165) While it is difficult to distinguish the portion of private users that want to access, in addition to their private email,  their  corporate
   mail account from their personal devices (BYOD policy), Microsoft estimates, on the basis of a report by Juniper Research, that by  2018,  the
   portion of such users may grow to almost 35% of the total installed base of consumer owned tablets and smartphones.

166) Regarding this portion of private users, the market investigation confirmed that, in principle, such private  users  could  use  alternative
   communication protocols such as POP3 or IMAP (and SMTP for sent email) to synchronise corporate email with Microsoft Exchange Server if  their
   employers implement these options in case Microsoft were to stop licensing EAS to third party OEMs.[79] However, the market investigation also
   indicated, as also noted by Microsoft, that these alternative solutions are limited to email and hence exclude synchronisation of calendar and
   contact information. To the extent that a sub-segment of consumers find it indispensable to seamlessly synchronise their personal smart mobile
   device with email as well as calendar, contact and other data stored in their corporate mail account, the analysis under  section  4.2.2.3.2.2
   below applies to that portion of the consumer segment of the smart mobile device market.

2 Corporate segment of smart mobile devices

    (i) Ability

167) For the reasons set out below, the Commission considers that Microsoft will not have the ability to foreclose the large  majority  of  smart
   mobile device manufacturers in the corporate segment of smart mobile devices.

168) First, the data gathered in the market investigation confirms Microsoft’s submissions that the latter  would  face  significant  contractual
   obstacles to restrict access to its Exchange Server communication protocol.

169) In the first place, the majority of smart mobile device competitors that responded to  the  market  investigation  confirmed  that,  to  the
   extent that they have an OEM device licence, Microsoft does not have the ability to terminate the licences (except for the limited  conditions
   outlined in paragraph (154) above) and/or to increase royalties and/or otherwise alter licensing terms.[80] In that regard, given that […] OEM
   device licences are valid until [information regarding the duration of EAS patent licences] (and currently cover over 80%  of  EEA  smartphone
   sales), the Commission considers unfounded the claim by one respondent to the market investigation (whose licence is valid until  [information
   regarding the duration of EAS patent licences]) that Microsoft could increase royalties for its EAS licence. The Commission considers  equally
   unfounded the claim by that same respondent that Microsoft may terminate without cause the EAS licence agreement the respondent has  concluded
   with Microsoft, in light of the fact that under the agreement in question, Microsoft does not [information  concerning  the  circumstances  in
   which Microsoft has a right to terminate licences].

170) In the second place, all but one smart mobile device manufacturer that responded to the market investigation and that currently have an  OEM
   device licence indicated that its EAS licence covers the current (2013) version of Exchange Server and  its  EAS  protocol,  and  any  version
   released in the next 3 years.[81] Moreover, contrary to the claim by one OEM respondent,  Microsoft  has  the  obligation  under  its  licence
   agreement with that OEM to [information regarding future grants of rights] updated or upgraded version of the EAS protocol.

171) In the third place, one OEM respondent that does not have an OEM device licence to EAS expressed concerns with respect  to  Microsoft’s  EAS
   licensing strategy towards third party email client app providers that implement EAS and may supply this software to OEMs for pre-installation
   on their smart mobile devices. In particular, the respondent expressed concern that Microsoft may terminate the licence with the  provider  of
   its email mobile app that it pre-installs on its smart mobile devices to allow users to synchronise the device with Exchange Server.[82]

172) Upon the Commission's request, Microsoft submitted a list with all mobile app providers that currently licence EAS patents.  The  Commission
   notes that the vendor of the particular email mobile app that the OEM respondent referred to in its submission to the Commission is  not  part
   of this list.[83] Given that the OEM's use of the specific email app would not appear to be currently licensed, the concern is  therefore  not
   merger-specific.

173) In the fourth place, another OEM respondent submitted that Microsoft, while continuing to license EAS to third  party  smart  mobile  device
   suppliers, will have the ability to technically degrade certain  versions  of  EAS  or  to  restrict  their  interoperability  to  impact  the
   competitiveness of its licensees in the downstream market while its own smart mobile devices will benefit from superior interoperability.

174) The Commission considers, however, that Microsoft cannot technically degrade any version of EAS as the OEM device licence is  a  patent-only
   license, not a technology license. The EAS protocol has been made available as a specification that must be implemented by  third  parties  as
   software code in their own servers, devices or apps.[84] Respondents to the market investigation support this fact as  they  state  that  they
   independently develop their own software for the client-side implementation of EAS.[85]

175) In addition, Microsoft cannot degrade future versions of the specification by removing key functionalities because if it did, third  parties
   could implement current versions of the EAS specifications that are supported for backward compatibility in Exchange Server.[86] Moreover,  if
   Microsoft were to impair connections between licensed devices and new versions  of  Exchange  Server,  it  would  discourage  Exchange  Server
   customers from upgrading to the newest version of Exchange Server because this would impair compatibility with the smart mobile  devices  most
   commonly used by their employees.

    (ii) Incentives

176) The Commission notes that while it cannot be excluded that Microsoft may have a certain incentive to engage in the hypothetical  foreclosure
   strategy, this is tempered by the fact that customers may switch in the medium and longer term, thereby jeopardising a certain  percentage  of
   Exchange Server revenues on the server-side of the business (as well as EAS licensing revenues on the device side).

177) On the one hand, the market investigation did not confirm Microsoft's claim that corporate users could easily switch  from  using  Microsoft
   Exchange Server to competing suppliers of enterprise mail server software and services, in particular because the cost and time for  switching
   appear to be significant.[87] In addition, certain respondents suggested that, assuming customers cannot switch  away  from  Exchange  Server,
   Microsoft may have a greater economic incentive compared to the pre-merger situation to stop licensing EAS to third parties  with  a  view  to
   increasing its sales of smart mobile devices. Indeed, post-transaction, Microsoft's gross  margin  on  the  sale  of  the  integrated  device,
   including both the OS and the hardware, appears to be higher than the pre-merger gross margin achieved by Microsoft from the licensing of  the
   OS alone.

178) On the other hand, certain respondents to the market investigation indicated that despite the significant  cost  and  time  switching  would
   take, in the medium or longer run at least a significant portion of Exchanger Server customers would switch  to  alternative  enterprise  mail
   software or service providers. Notably, half of the Exchange Server customers expressing an opinion stated that they would eventually  replace
   Exchange Server with another mail server software or service in order to enable synchronisation of email, calendar, contact and task data with
   smart mobile devices although most stressed the significant cost and effort this would cause.[88] As one customer put it: "Replacing the whole
   backend infrastructure […] seems not appropriate however in worst case could be a possible result."[89]

179) Moreover, certain respondents to the market investigation noted that post-transaction, it would not make business  sense  for  Microsoft  to
   stop licensing EAS to third party  suppliers  of  smart  mobile  devices  and/or  mobile  OSs  or  mobile  apps,  or  to  make  such  licenses
   uneconomical.[90] HP submits that "it is in Microsoft’s interest to facilitate widespread  adoption  of  its  Exchange  software  and  OS.  If
   interoperability functionality is not available, the viability of Microsoft software and OS diminishes substantiality for end users." Jolla, a
   mobile OS supplier, states that "ActiveSync business is mainly server side business for Microsoft. Therefore, we believe that it does not make
   business sense for Microsoft to stop licensing the technology to other providers. ActiveSync is the best solution for corporate customers  and
   it is also Microsoft's benefit to continue supporting them (regardless of the OS they are using)."

    (iii) Effects

180) For the reasons below, the Commission considers that a potential foreclosure strategy would not have  a  significant  effect  on  the  smart
   mobile device market and its possible segments.

181) First, a portion of the enterprise mail server software and services market would not be affected by such a strategy  as  certain  companies
   do not rely on Exchange Server. According to Microsoft's estimates, this portion would be [40-50]% in the EEA and  [60-70]%  if  the  relevant
   product market were the overall enterprise mail server software and services market and [10-20]% in the EEA  and  [20-30]%  worldwide  if  the
   relevant product market were confined to on-premises mail server software and IaaS.

182) Second, as discussed in detail in paragraphs (168) above, the portion of the market that could be affected by such  a  foreclosure  strategy
   would be limited, due to the fact that a large majority of smart  mobile  device  suppliers  are  contractually  protected  against  Microsoft
   engaging in a foreclosure strategy through the use of EAS and/or hampering interoperability with new versions of Exchange Server

183) Third, Nokia's smartphones running Windows Phone currently have a low share in the market for smart mobile devices (including  the  possible
   segment of devices for corporate use, where the share of Windows Phone, including  the  share  of  the  D&S  Business,  was  [0-5]%  of  total
   activations of smartphones in the worldwide enterprise segment in Q1 2013). As a result, the Commission  considers  that  Microsoft  would  be
   unable to foreclose suppliers such as Apple or Samsung from the overall market for smart mobile devices in the foreseeable  future,  as  these
   suppliers currently enjoy a much stronger position both in the consumer segment as well as in the corporate segment.

    (iv) Conclusion

184) Based on the above, the Commission concludes that the proposed transaction will not give rise to serious  doubts  as  to  its  compatibility
   with the internal market as a result of input foreclosure through restricting Microsoft's Exchange Server communication protocol licensing.

3 Nokia's possible post-transaction conduct with respect to its SEPs and non-SEPs

185) Several respondents to the market investigation raised concerns about possible  post-transaction  conduct  by  Nokia  with  respect  to  its
   portfolio of SEPs and non-SEPs relevant for smart mobile devices, which Nokia will continue to own after post-transaction.

1 SEPs and non-SEPs

186) Thousands of different patents may read on a smart mobile device. These patents may include both SEPs and non-SEPs and  are  generally  held
   by various companies. It is clear that smart mobile devices (operating on a mobile software platform) must, in order to  operate  effectively,
   comply with various standards that have been developed for mobile communications.

187) The European Telecommunication Standard Institute's ("ETSI") IPR Policy defines SEPs as follows: '''ESSENTIAL' as applied to IPR means  that
   it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally
   available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply
   with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a  STANDARD  can  only  be  implemented  by
   technical solutions, all of which are infringements of IPRs, all such IPRs shall be considered ESSENTIAL''.[91]

188) A company wishing to produce goods complying with a certain standard on which SEPs read cannot  do  so  without  either  a  licence  to  the
   technology incorporated in that standard on which the SEPs read or by infringing the patents covering that technology. Prior to  the  adoption
   of a standard, multiple technologies may have competed to become a standard. However, once a standard has been adopted and widely  implemented
   by the industry and in the absence of competing standards, firms that use these technologies may be severely limited in their ability  to  use
   another technology. The very purpose of choosing a standard is that the industry agrees on  a  specific  technological  solution  rather  than
   alternative technologies. Inter-technology competition that existed before is therefore impeded and any alternative technologies or  technical
   solutions that may have had the same functionalities as the one chosen as the standard technology may have a significantly reduced  value.  In
   other words, once the standard is set, and in the absence of a competing standard, technology competition is largely undermined.

189) The Commission Guidelines on the applicability of Article 101 of the Treaty on the Functioning of  the  European  Union  to  horizontal  co-
   operation agreements (''Horizontal Guidelines") acknowledge the significant positive economic effects that may be produced by  standardisation
   agreements.[92] However, the Horizontal Guidelines note that "[b]y virtue of its IPR, a participant holding IPR essential for implementing the
   standard, could, in the specific context of standard-setting, also acquire control over the use of a standard. When the standard constitutes a
   barrier to entry, the company could thereby control the product or service market to which the standard relates.  This  in  turn  could  allow
   companies to behave in anti-competitive ways, for example by ‘holding-up’ users after the adoption of  the  standard  either  by  refusing  to
   license the necessary IPR or by extracting excess rents by  way  of  excessive  royalty  fees  thereby  preventing  effective  access  to  the
   standard".[93]

190) Standard Setting Organisations (“SSOs”) have policies and procedures in place intended to facilitate the  standardisation  of  the  selected
   technology, based on technical performances and other relevant elements. SSOs typically provide in their governing rules  that  their  members
   should reveal all relevant IPR in advance of adoption of a standard, or to commit to license any IPR relevant  to  the  standard  on  “(fair,)
   reasonable, and non-discriminatory terms” (“FRAND”) terms.

191) As set out in the Horizontal Guidelines: "FRAND commitments are designed to ensure that essential IPR protected technology  incorporated  in
   a standard is accessible to the users of that standard on fair, reasonable and non-discriminatory terms and conditions. In  particular,  FRAND
   commitments can prevent IPR holders from making the implementation of a standard difficult by refusing to license or by requesting  unfair  or
   unreasonable fees (in other words excessive fees) after the industry has been locked-in to the standard or by charging discriminatory  royalty
   fees"[94].

192) FRAND commitments essentially oblige SEP holders: (i) to make the patent in question available to all interested third parties; (ii) not  to
   discriminate between different licensees; and (iii) to offer a licence to the patent on fair and reasonable terms. SEP  holders  do,  however,
   have the right to conduct undistorted negotiations with interested parties concerning the exact terms and conditions of the licence, including
   the exact level of royalties and the right to enforce agreements on such terms by means of litigation.

193) As regards non-SEPs, the commercial importance of these patents varies. Such patents are not  part  of  a  formal  technical  standard,  the
   nature of many such patents may be incremental, and it is often easier to design around a patent falling in this category. Non-SEPs may relate
   to features used to differentiate competitors' products on the market, thus creating dimensions on which  firms  aggressively  compete.  FRAND
   commitments do not apply to non-SEPs That being said, non-SEPs can also potentially be the  basis  for  foreclosure  of  rivals  and  possible
   abusive conduct. For example, in exceptional circumstances, notably where a technology has become an indispensable input  for  competitors,  a
   refusal to grant access to that technology may be abusive.[95] However,  this  has  to  be  assessed  with  regard  to  the  specific  factual
   circumstances in each individual case.

2 Concerns expressed by certain respondents to the market investigation in relation to the post-transaction conduct of Nokia

194) Certain respondents to the market investigation expressed a number of concerns with  regards  to  the  possible  post-transaction  licensing
   practices of Nokia after the de-merger of its D&S business.

1 The proposed transaction creates or strengthens Nokia's dominant position in patent licensing by eliminating the current  restraints  on  Nokia
        that result from its current activity in the mobile phone business

195) A number of respondents to the market investigation claimed that the proposed transaction creates or strengthens Nokia's  dominant  position
   in patent licensing, both regarding its SEPs and non-SEPs, by eliminating the restraints on Nokia that result from its current activity in the
   mobile phone business.

196) First, the respondents contend that Nokia was previously constrained in exploiting its market power with regard  to  SEPs  and  non-SEPs  in
   several ways. In the first place, Nokia required licences (often granted as cross-licences) from its competitors that  also  hold  patents  in
   order to avoid findings of patent infringement. In the second place, Nokia was vulnerable to counter-attack if it  aggressively  enforced  its
   patents (“mutually assured destruction”). In the third place, Nokia had a general incentive  to  seek  reasonable  royalties  so  as  to  keep
   consumer prices for its products low and not to hamper demand in the downstream devices market. In the fourth place, Nokia  had  an  incentive
   not to outsource patent enforcement to so-called Patent Assertion Entities ("PAEs"), so as to discourage other mobile phone manufacturers from
   also using such entities against Nokia’s mobile device business.

197) Second, the respondents allege that the proposed transaction will eliminate these restraints, as it will separate Nokia’s  patent  portfolio
   from the D&S mobile phone business and thereby increase, post-transaction, Nokia’s ability and incentive to exploit the market  power  derived
   from its patent portfolio.

198) Third, the respondents claim that the effect of the  present  transaction  is  different  from  the  Google/Motorola  transaction.  Google's
   acquisition of Motorola’s patents was designed to deter future litigation against Android OEMs by improving the balance of  patent  portfolios
   between different industry participants. The present transaction, however, will result in an imbalance as Nokia will no longer  have  its  own
   operations in the field of mobile devices.

2 The Merger Regulation is applicable to review the notified operation's effect on Nokia

199) A number of respondents to the market investigation argued, with reference to case law of  the  European  courts[96]  and  the  Commission's
   decisional practice,[97] that the Commission can and must review all effects of a notified transaction on competition  regardless  of  whether
   they relate to the merging parties or a third party.  A  significant  impediment  to  effective  competition  is  likely  to  result  where  a
   concentration affects the structure of a market and/or from the abilities and incentives of certain undertakings to raise prices or  otherwise
   foreclose competition. Such effects on competition may occur through the effects that the concentration will have  on  the  conduct  of  third
   parties. In light of the concept of effet utile of the Merger Regulation, the substantive test needs to also apply to these  instances.  As  a
   corollary, the Merger Regulation should also be interpreted as allowing the Commission to accept commitments offered by a seller  where  there
   is some causal link between the structural change that results from a concentration and the position and incentives of the seller.

3 The proposed transaction will result in mobile device manufacturers other than Microsoft paying increased royalties  for  the  use  of  Nokia’s
        patents

200) A number of respondents to the market investigation claimed that the proposed transaction will result in mobile device  manufacturers  other
   than Microsoft paying increased royalties for the use of Nokia’s patents.

201) First, the respondents draw the Commission’s attention to the peculiar structure of the proposed transaction, whereby  Nokia  transfers  the
   D&S Business to Microsoft, but retains ownership of the relevant patent portfolio. In their view, this  specific  transaction  structure  will
   allow Nokia to increase its patent royalties and thus raise the costs of mobile device manufacturers other than Microsoft.  They  also  submit
   that the decision to specifically attribute EUR 1.65 billion of the total purchase price paid by Microsoft to Microsoft's 10-year  licence  to
   Nokia's patents is designed to allow Nokia to raise its royalty rates in future licence negotiations.

202) Second, the respondents claim that, since Nokia will no longer need  to  enter  into  cross-licences  following  the  proposed  transaction,
   Nokia’s anticipated change to prefer unilateral licence negotiations will enable it to ask for higher royalty payments.  Royalty  maximization
   would now be Nokia's principal aim in bilateral negotiations from mobile device manufacturers other than Microsoft. The precedent of Ericsson,
   which has allegedly multiplied its royalty demands for patents on which mobile devices read following the sale  of  its  share  in  the  Sony-
   Ericsson Mobile communications joint-venture to Sony, demonstrates that the outlined behaviour is likely.

203) Third, as far as Nokia's SEPs are concerned, the respondents submit that Nokia's FRAND  obligations  will  not  replace  the  constraint  on
   Nokia's licensing policy provided by its activity in mobile device manufacturing. In the first place, the legal and practical effects of FRAND
   commitments are subject to considerable uncertainty under contract, patent and antitrust law  and  national  courts  have  rendered  differing
   interpretations of the legal effects of FRAND commitments. In the second place, it is, at present, unclear how to  determine  FRAND  royalties
   and on the basis of what criteria they should be established. Usually, there will not be only one specific  FRAND  royalty  for  a  patent  or
   portfolio, but a range of royalties that may all qualify as FRAND, but which could vary significantly.  The  proposed  transaction  will  give
   Nokia the ability and incentive to strive for the maximum FRAND rate.

204) Fourth, the respondents argue that Nokia will have a greater incentive post-transaction, to disaggregate  its  patent  portfolio  and  enter
   into agreements with PAEs. This will be one way for Nokia to partly circumvent its FRAND obligations. It will also result in the  stacking  of
   royalties and a higher overall rate. One respondent observes that Nokia already has a history of  selling  or  transferring  patents  to  PAEs
   listing 16 such transactions since 2007.

4 Increased enforcement by Nokia of non-SEPs against mobile device manufacturers other than Microsoft

205) A number of respondents to the market investigation claimed that the proposed transaction will result in increased enforcement by  Nokia  of
   non-SEPs against mobile device manufacturers other than Microsoft.

206) First, the respondents argue that while pre-transaction, Nokia did not include its non-SEPs when negotiating cross-licences,  it  will  have
   the incentive to do so post-transaction, including the threat of seeking injunctions, given that it is no longer active in the supply of smart
   mobile devices.

207) Second, the respondents submit that by using its non-SEPs – which are not subject  to  FRAND  commitments  –  as  an  additional  source  of
   licensing revenue post-transaction, Nokia will be able to  further  increase  licensing  costs  of  mobile  device  manufacturers  other  than
   Microsoft. Nokia has the ability to engage in such a course of action as its non-SEP portfolio is "commercially essential"  for  smart  mobile
   device manufacturers. Its non-SEP portfolio is also so extensive that in practice, it does not allow mobile  device  manufacturers  to  design
   around Nokia’s non-SEPs.

208) Third, the respondents argue that defending themselves against patent infringement  actions  before  the  courts  is  costly  and  therefore
   ineffective. Even if an OEM has the resources to resist some of the anticipated  lawsuits  by  Nokia,  it  will  ultimately  be  incapable  of
   withstanding the burden of incessant legal actions by a holder of a  patent  portfolio  as  large  as  Nokia's.  In  practice,  mobile  device
   manufacturers other than Microsoft will have no other choice than to enter into a licensing agreement  with  Nokia,  whether  or  not  Nokia's
   patents are commercially essential.

5 The proposed transaction will result in anticompetitive effects

209) A number of respondents to the market investigation submitted that Nokia’s changed incentives to no longer engage in cross-licensing and  to
   conclude unilateral licences with higher royalty rates would lead to a significant impediment to effective competition.

210) First, the cost of OEMs (other than Microsoft, whose terms for the licensing of Nokia’s patents relevant to the D&S Business  are  fixed  as
   part of the proposed transaction) would be raised and some of these players could potentially be foreclosed.

211) Second, Nokia's presumed increased royalties will disproportionately harm actual or potential new entrants  and  smaller  OEMs,  which  have
   lower margins and which will need to pass on their costs to the consumer. Higher margin device manufacturers, and those which are protected by
   an existing license, will thereby gain a competitive advantage.

212) Third, the respondents submit that the increased costs for smart mobile device manufacturers  (increased  royalty  rates,  royalty  stacking
   through Nokia and PAEs) would eventually be passed on to consumers in the form of higher prices.

3 The views of the Notifying Party and of Nokia

213) Both Microsoft and Nokia (whose views on the above outlined claims the Commission sought as part of its investigation, despite it not  being
   a party to the proposed transaction) argued that the assessment of the possible significant impediment to effective competition deriving  from
   Nokia’s post-transaction conduct falls outside the scope of  the  Commission’s  assessment  of  the  proposed  transaction  under  the  Merger
   Regulation.

214) First, Microsoft and Nokia claim that Article 2 of the Merger Regulation refers to the impact on competition of  "concentrations"  and  that
   the notion of concentration enshrined in Article 3 of the Merger Regulation only comprises the merging parties, that is to say, in the case at
   hand, the acquirer (Microsoft) and the target (the D&S business), and not the seller (Nokia). Moreover, they submit  that  in  order  for  the
   Merger Regulation to capture the possible significant impediment to effective competition of a proposed transaction, that may arise  from  the
   conduct of a third party, the merged entity has to play an active role in the creation of such an impediment  or,  at  the  very  least,  have
   incentives that are closely aligned to those of the third-party.

215) Second, Nokia notes that there is nothing unusual about the transaction structure whereby it will maintain ownership of its  SEPs  and  non-
   SEPs generated during the time it engaged in the business now being acquired by Microsoft. IBM did the same  in  2004  when  it  sold  its  PC
   business to Lenovo, as did Siemens, when it sold its mobile device division to BenQ, and Ericsson when it decided to  exit  the  mobile  phone
   business by selling its share in Sony-Ericsson to Sony. While Nokia is keeping its patent portfolio, the situation as regards the exercise  of
   its IP rights would have been identical had Nokia decided to shut down its D&S Business.

216) Third, Nokia submits that its patent portfolio of over 10 000 patent families results from a cumulative  Research  and  Development  ("R&D")
   investment of EUR 50 billion over the past two decades and that it currently generates annual revenue of EUR 500 million from its IP business.
   The EUR 1.65 billion payment is thus [information regarding the valuation of the patents transferred to Microsoft].

217) Fourth, Microsoft states that the licence acquired from Nokia will enable it to achieve a broad  level  of  patent  peace.  The  fundamental
   purpose of the proposed transaction for Microsoft is to acquire Nokia's D&S business assets and to ensure that  it  is  able  to  use  Nokia's
   patented inventions to build upon the assets that it is acquiring from Nokia without infringing its rights. Furthermore, the new Nokia  patent
   licence, unlike the pre-existing licence that would have expired in two years, will include Nokia's  substantial  portfolio  of  wireless  and
   cellular SEPs, and it covers all Microsoft software, hardware, products or services. Microsoft submits that a non-exclusive licence from Nokia
   is entirely sufficient to achieve this goal and that it is significantly cheaper to licence the Nokia portfolio than to acquire it. Based on a
   contemporaneous Microsoft document elaborated during the negotiation of the transaction, Microsoft estimates  that  an  acquisition  including
   Nokia's patent portfolio would have cost it an estimated […] to the cost of the proposed transaction.

218) Fifth, Nokia and Microsoft argue that, post-transaction, the value of Nokia's patent portfolio will remain unchanged. As a result,  the  end
   result of the negotiations for the licensing of Nokia’s patent portfolio to third parties will continue to reflect the same value  of  Nokia’s
   patents. By the same token, Nokia further notes that the proposed transaction will not diminish the value of patents relevant to smart  mobile
   devices held by mobile device manufacturers other than Microsoft. Post  transaction,  these  mobile  device  manufacturers  will  be  able  to
   negotiate licensing agreements for the value of their patents with both Microsoft, and to the extent they have  patents  relevant  to  Nokia’s
   remaining or new businesses, with Nokia.

219) Sixth, Nokia affirms that, post-transaction, it will not be able to claim higher than FRAND royalties for its SEPs, as  they  will  continue
   to be subject to the FRAND commitments given by Nokia in accordance with the IPR policies of the relevant SSOs.

220) Seventh, Nokia points out that it will remain in the market as an operating company through its Nokia Solutions  Network  (“NSN”)  and  maps
   (HERE) businesses. As such, Nokia will need to enter into cross-licences for these businesses. Furthermore, any attempt to enforce its  mobile
   device patents could lead to retaliation against these businesses.

221) Eighth, with regard to its non-SEPs, Nokia notes that it is not aware that any of these are commercially essential to a  company  active  in
   smart mobile devices, mobile OS and/or mobile apps. [information regarding Nokia's past licencing policy for its non-SEPS],  these  incentives
   may change post-transaction, which would be a pro-competitive development.

4     The Commission's assessment

1 Introduction

222) It is important to underline that the  proposed  transaction  involves  the  acquisition  by  Microsoft  of  the  D&S  Business.  These  two
   undertakings are the parties to the concentration. Hence, the concerns relating to the business that  Nokia  retains  are  not  horizontal  in
   nature, as they do not arise from the existence  of  a  horizontal  overlap  between  the  undertakings  that  are  parties  to  the  proposed
   concentration. They are also not non-horizontal in nature, as they do not arise from the existence of  a  vertical  relationship  between  the
   activities of the parties to the proposed transaction. They finally do not arise from the fact that the parties to  the  proposed  transaction
   are active in neighbouring markets.

223) Instead, the concerns derive from the alleged change in post-transaction incentives of the seller, Nokia that  result  from  the  de-merger,
   that is to say from the divestment of the D&S Business to Microsoft. This explains why the Commission has assessed the  allegations  regarding
   these possible-anticompetitive effects separately from the analysis of the possible horizontal and non-horizontal effects of the concentration
   (the business combination between Microsoft and the D&S Business).

2 Scope of the Merger Regulation

224) The first issue the Commission has assessed  is  whether  possible  post-transaction  conduct  of  Nokia  falls  within  the  scope  of  the
   Commission’s assessment of the proposed transaction under the Merger Regulation. For the reasons set out below, the Commission considers  that
   the possible post-transaction conduct of Nokia falls outside the scope of the Commission’s assessment of the proposed  transaction  under  the
   Merger Regulation.[98]

225) First, this conclusion is consistent with the wording of the Merger Regulation and the Implementing Regulation. Article 2(1) of  the  Merger
   Regulation provides that in appraising a concentration, the Commission shall take into account the need  to  maintain  and  develop  effective
   competition in view of, among other things, "the structure of all the  markets  concerned"  and  "the  market  position  of  the  undertakings
   concerned". Under Article 2(3) of the Merger Regulation there must be a causal effect between the merger and  the  significant  impediment  to
   effective competition.[99] According to Article 1(1), the Merger Regulation applies to concentrations with a Union dimension. Article 3(1)  of
   the Merger Regulation defines a concentration as the merger of two or more previously independent undertakings or parts of undertakings or the
   acquisition by one or more undertakings of direct or indirect control over the whole or parts of one or more undertakings.

226) Moreover, Article 5(2) of the Merger Regulation further explains that "where  the  concentration  consists  of  the  acquisition  of  parts,
   whether or not constituted as legal entities, of one or more undertakings, only the turnover relating to the parts which are  the  subject  of
   the concentration shall be taken into account with regard to the seller or the sellers". The  Commission  Consolidated  Jurisdictional  Notice
   clarifies that the “undertakings concerned” are the undertakings “participating in a concentration” and that, in the case where  parts  of  an
   undertaking are being acquired, “the undertakings concerned will be the acquirer(s) and the acquired part(s) of the  target  undertaking,  but
   the remaining business of the seller will be ignored.”[100] Article 11 of the Implementing Regulation and section 2 of  the  Form  CO  annexed
   thereto, also clearly distinguish between the notifying party or parties, and other involved parties, such as the seller, and  third  parties.
   It is therefore clear from  the  provisions  of  the  Merger  Regulation,  the  Implementing  Regulation  and  the  Commission’s  Consolidated
   Jurisdictional Notice that these undertakings are the so-called “undertakings concerned” by a  concentration,  that  is  to  say  the  parties
   thereto.

227) In addition, under Article 2(4) of the Merger Regulation, in the case of a joint  venture  constituting  a  concentration,  if  coordination
   among the parents ensues from the creation of the joint venture, this behaviour shall be appraised from the viewpoint of Article 101 TFEU.

228) Finally, it is clear from the provisions concerning remedies included in the Merger Regulation and  the  Implementing  Regulation[101]  that
   only the acquirer and the target of the acquisition can offer commitments  to  address  a  risk  of  a  significant  impediment  to  effective
   competition, Similarly, conditions, obligations and penalties aimed at ensuring compliance with such commitments can be imposed only on  those
   parties (and not on third parties, including the seller).

229) By contrast, taking the opposite view would lead, in extremis, to the result of requiring the Commission to  analyse,  in  every  case,  not
   only the structural impact of a concentration resulting from the combination of the assets of the parties thereto in the  markets  where  they
   are active, but also the impact of a concentration on all relevant markets where the seller operates.

230) Second, the Commission considers the above conclusion is not affected by the judgment of the Court of  Justice  in  Kali  und  Salz  or  the
   previous Commission decisions pointed to by the respondents, all of which concerned  cases  in  which  the  anti-competitive  effects  of  the
   concentrations arose as a result of the post-transaction conduct of third parties in combination with the activity of the merged entity on the
   relevant market, and not just of the seller.

231) Kali und Salz concerned a case of joint dominance, in which the merging parties' behaviour was part of  a  behaviour  which,  together  with
   those of other undertakings, would give rise to collective dominance concerns after the merger. It was against this backdrop that the Court of
   Justice held that:

       “A concentration which creates or strengthens a dominant position on the part of the parties concerned with an entity not involved in  the
       concentration is liable to prove incompatible with the system of undistorted competition which the Treaty seeks to  secure.  Consequently,
       if it were accepted that only concentrations creating or strengthening a dominant position on the part of the parties to the concentration
       were covered by the Regulation, its purpose as indicated in particular by the above mentioned recitals would be partially frustrated.  The
       Regulation would thus be deprived of a not insignificant aspect of its effectiveness, without that being necessary from the perspective of
       the general structure of the Community system of control of concentrations.”

232) The Court of Justice’s judgment did not therefore deal with the situation at issue in this case, where the  alleged  significant  impediment
   to effective competition depends only on the conduct of a third party (Nokia, the seller) without any involvement of the merged entity.

233) The same is true of the previous Commission decisions pointed to by the respondents. In Exxon/Mobil,[102]  Exxon  held  a  (non-controlling)
   25% stake in Gasunie (the dominant player in the Dutch gas wholesale transmission market) prior to the transaction and Mobil was one  of  only
   two “active” competitors in that market, and was the only competitor with reserves that had not been  committed  to  Gasunie.  The  Commission
   found that the merger of Exxon and Mobil would have strengthened  Gasunie’s  dominant  position,  mainly  because,  as  a  result  of  Exxon’s
   “important and lucrative stake” in Gasunie, “a merger between Mobil and Exxon would in normal  circumstances  lead  to  a  greatly  diminished
   incentive for Mobil to compete against Gasunie”. Hence, the effect of the concentration would have resulted from  a  structural  link  between
   Gasunie and the merged entity. Moreover, the effects of this structural link would have been felt in a market, in which both the merged entity
   and the third party (Gasunie) were active. It is clear that in that scenario,  the  merged  entity  played  a  key  role  in  the  significant
   impediment to effective competition that was identified, as the concentration would reduce the merged entity's incentive to compete  with  the
   third party (in which it held an important stake), thereby enhancing that third party's dominant position on the affected market.

234) In Grupo Villar/EnBW/ Hidroeléctrica del Cantábrico,[103] EDF was acquiring joint control of  Hidrocantábrico,  a  company  with  generating
   capacity in Spain. Prior to the transaction, EDF exported electricity to Spain. The Commission found that the EDF's acquisition of electricity
   generating capacity in Spain would substantially strengthen its position in the Spanish market without it having to invest in  interconnection
   capacity and found that EDF had incentives to avoid increasing interconnection capacity. The Commission concluded that,  if  the  perspectives
   for new entry and pricing pressure were to be reduced, the transaction would, in addition  to  strengthening  EDF’s  position,  reinforce  the
   Endesa/Iberdola duopoly in the Spanish market for wholesale electricity.

235) In EnBW/EDP/Cajastur/Hidroeléctrica,[104] subsequent to EDF’s acquisition, EDP was acquiring joint control of  Hidrocantábrico.  Again,  the
   Commission found that the concentration would reduce EDF’s incentives to compete with third parties by investing in interconnection  capacity,
   and thereby maintain the barriers to entry that preserved high prices and in turn strengthen the  third  parties'  (Endesa´s  and  Iberdola´s)
   position on the affected market (the market for wholesale electricity in Spain).

236) In Lagardère/Sportfive,[105] certain respondents to the market investigation alleged that, post-transaction, third parties,  such  as  sport
   event organisers and broadcasting rights owners, would have an incentive to partner with the merged  entity  to  the  detriment  of  competing
   intermediaries (and ultimately TV operators acquiring  broadcasting  and/or  marketing  rights  from  these  intermediaries)  because  of  the
   structural link between the merged entity and Canal+ (in which the merged entity would hold a minority shareholding). Although the  allegation
   focused on the incentives of third parties post-transaction to favour the merged entity post-transaction the behaviour of  the  merged  entity
   itself, as well of as Canal+, contributed to the risk of significant impediment of effective competition. When dismissing that allegation, the
   Commission focused on the post-transaction incentives of the merged entity to favour Canal+ to the detriment of other TV broadcasters  and  on
   Canal+'s increased incentives to purchase broadcasting rights from the merged entity.

237) Finally, in E.ON/MOL,[106] the Commission accepted commitments from E.ON, according to which  E.ON  would  procure  the  seller  to  perform
   certain actions. This entailed the termination of a long-term agreement with E.ON and the divestiture of certain remaining minority stakes  in
   the target that E.ON would acquire. The commitment consisting of the termination of a long-term agreement between E.ON and the seller directly
   involved the buyer, E.ON, which was a party to the agreement to be terminated The commitment consisting of the  divestiture  of  the  seller's
   stake in the target also concerned a structural link between a party to the concentration (the target) and the seller. Moreover, the severance
   of this link also involved E.ON as the acquirer of the target business, in which the stake would need to be released. The situation  at  stake
   in E.ON/MOL was therefore different from that in  the  present  case,  where  respondents  have  argued  that  the  Commission  should  accept
   commitments, which exclusively concern the relationship of Nokia with third parties, with Microsoft, the buyer,  not  being  a  part  of  that
   relationship, but nonetheless remaining liable for Nokia's fulfilment of such commitments.

3 Assessment of Nokia’s possible post-transaction conduct if it were to fall within the scope of the  Commission’s  assessment  of  the  proposed
        transaction under the Merger Regulation

238) Even if the assessment of Nokia’s post-transaction conduct were to fall within the scope of the  Commission’s  assessment  of  the  proposed
   transaction under the Merger Regulation, that conduct would not, for the reasons set out below, lead  the  Commission  to  conclude  that  the
   transaction gives rise to serious doubts as to its compatibility with the internal market.

1 Structure of the proposed transaction and consideration paid by Microsoft

239) As a preliminary remark, the Commission rejects the arguments put forward by certain respondents to the market investigation,  according  to
   which the structure of the proposed transaction is dictated by the objective of achieving a significant impediment  to  effective  competition
   and that the valuation of Microsoft’s license for Nokia’s patent portfolio is artificially inflated.

240) The Commission notes that Microsoft has  explained  to  a  satisfactory  extent  the  reasons  underlying  the  structure  of  the  proposed
   transaction. By the same token there is a plausible commercial explanation, including based on contemporaneous internal  documents,  regarding
   the valuation that it attached to the Nokia patent license.

241) The Commission considers that the structure of the proposed transaction appears, rather, to be dictated by Microsoft’s interest for, on  the
   one hand, acquiring the D&S Business and, on the one hand, ensuring that it has access to the relevant IP, while, at the same time, not  being
   required to purchase the whole of Nokia’s IP, which would have been more expensive.

242) The Commission also considers that Microsoft’s internal documents, including Board presentations and valuation studies,  support  the  value
   it attaches to the license to Nokia’s patents (those documents indicate that [information regarding Microsoft valuation of license].

2 Nokia's post-transaction ability to enforce its SEPs

243) Regarding Nokia’s post-transaction ability to enforce its SEPs, the Commission's assessment is based on the following considerations.

244) First, Nokia’s ability to enforce its SEPs is not merger-specific. That ability already existed (or did not exist)  prior  to  the  proposed
   transaction. The same is true with regard to Nokia´s ability to enter into agreements with PAEs.

245) In this respect, the Commission notes that a number of market participants already have a licence or cross-licence to Nokia's mobile  device
   SEPs. Companies such as […] all have concluded patent licence agreements with Nokia.

246) In terms of 2012 sales of smart mobile devices, [70-90%] of the EEA market of smart mobile devices (sales measured in volume  and  excluding
   Nokia and Microsoft devices) and [60-70%] of the worldwide market were covered by existing patent licensing  agreements  for  the  foreseeable
   future. Only a small minority of OEMs with limited market share in the EEA and worldwide have patent  licensing  agreements  with  Nokia  that
   expire in the next two years.

247) The […] largest suppliers of smart mobile devices in the EEA in terms of 2012 market share in volume, apart from  Nokia,  all  have  entered
   into patent licensing agreements with Nokia in relation to the latter’s SEPs that last until […].

248) Samsung, currently by far the largest smart mobile device supplier in the EEA in terms  of  2012  market  share  in  volume,  renewed  on  4
   November 2013 its patent licensing agreement with Nokia until 2018, […]. Any disagreement regarding royalty payments will  be  solved  through
   binding arbitration under the rules of arbitration of the International Chamber of Commerce.  While  Nokia's  press  release[107]  notes  that
   "Samsung will pay additional compensation to Nokia for the period commencing from January 1, 2014 onwards",  third  party  arbitration  should
   ensure that royalty payments are in line with FRAND terms as far as SEPs are concerned (see also paragraph (251) below).

249) Nokia's licence agreement with Apple,[108] the  second  largest  manufacturer  of  smart  mobile  devices  in  the  EEA,  lasts  until  […].
   [Information on one or more licencing agreements between Nokia and  smart  mobile  device  manufacturer(s)].  Blackberry  (formerly  known  as
   Research in Motion, "RIM"), the fourth largest supplier, has an agreement in place until […]. [Information on one or more licencing agreements
   between Nokia and smart mobile device manufacturer(s)].

250) Based on the above, the Commission considers that Nokia’s ability to enforce its SEPs against these OEMs  with  a  view  to  increasing  the
   relevant royalty rates is not merger-specific. The Commission also notes that Nokia’s ability to enforce its SEPs against that limited portion
   of the market (mainly comprising Asian manufacturers, which, according to Nokia, have not sought, or are actively resisting  taking,  licenses
   to Nokia’s SEPs) is also not merger-specific. Such ability existed pre-transaction  and  will  continue  to  be  present  after  the  proposed
   transaction.

251) Second, the Commission considers that Nokia´s ability in relation to its SEPs is further limited by the various FRAND commitments Nokia  has
   given to SSOs. These commitments remain intact and fully in force as the ownership and control over Nokia SEPs is not changing.

3 Nokia's post-transaction incentives to enforce its SEPs

252) Even if Nokia's incentives to enforce its SEPs would change post-transaction, the effects of  any  such  change  will  be  limited  for  the
   following reasons.

253) First, Nokia remains a company with a strong commercial arm, which clearly distinguishes Nokia from a PAE, whose  only  commercial  activity
   consists of the valorisation of its IPR. According to Nokia´s annual report, its NSN business made up almost half  of  the  2012  group's  net
   revenues. Its commercial business is linked to the device business in the sense that NSN offers telecommunication infrastructure. While  Nokia
   no longer needs licences for its device business, it is still dependent on third party licences for its NSN  business.[109]  Similarly,  Nokia
   will continue to be active to offer solutions and licences to its digital mapping database and mobile map apps through its HERE business.

254) Second, Nokia has invested considerably over the past years into R&D in order to generate innovations  that  are  protected  by  patents,  a
   characteristic that also differentiates it from a PAE.

255) Third, any incentive Nokia will have to use its SEPs post-transaction to significantly impede effective competition will be limited  because
   of the Commission's enforcement policy under Articles 101 and 102 TFEU with respect to FRAND commitments, and in  particular  the  seeking  of
   injunctions by SEP holders.[110] In other words, Articles 101 and 102  TFEU  constitute  a  further  constraint  on  Nokia's  post-transaction
   incentive to use its SEPs post-transaction to significantly impede effective competition.

256) Fourth, even if Nokia´s current rates were not FRAND (and the Commission does not take position on that  issue  in  the  present  decision),
   this would not be a merger-specific problem because Nokia has applied those FRAND rates prior to the  merger.  Moreover,  since  the  proposed
   transaction does not alter the value of Nokia’s SEPs portfolio, the royalty rate that is currently included in  Nokia’s  cash  only  licenses,
   which, pursuant to Nokia’s commitments to SSOs, should, at least in Nokia’s view, be considered  as  FRAND,  and  may  constitute  a  relevant
   benchmark for future licensing negotiations.

257) Fifth, Microsoft has confirmed to the Commission that, there are, and have been, no documents, discussions or agreements  between  Microsoft
   and Nokia dealing with Nokia's post-transaction conduct in relation to the licensing of its SEPs to  third  parties,  including  any  possible
   direct or indirect involvement of Microsoft in Nokia's future decision-making in  this  regard  and/or  any  Microsoft's  direct  or  indirect
   entitlement in any of Nokia's future revenues from the licensing of its SEPs. Moreover, as Nokia also points out, after it exits the market as
   a smart mobile device supplier, it will be licensing its SEP patent portfolio in an entirely platform-neutral manner, having no incentives  to
   favour any smart mobile manufacturer or mobile OS over another.

258) Finally, for completeness, the Commission notes that the concern regarding PAEs is not merger-specific since  Nokia  has  been  engaging  in
   this strategy before the proposed transaction. Moreover, if one takes the view that the proposed transaction will reduce Nokia's  exposure  to
   third party patent claims, then it follows that Nokia´s incentive to enter into agreements with PAEs  may  be  reduced  as  a  result  of  the
   proposed transaction.

4 Nokia's post-transaction incentives and ability to enforce its non-SEPs

259) Even if Nokia's post-transaction incentives and ability to enforce its non-SEPs were to change post-transaction, the  effects  of  any  such
   change will be limited for the following reasons.

260) First, despite the claim that Nokia's non-SEP portfolio is too extensive to allow effective designing-around in  practice,  the  information
   gathered during the market investigation does not contain indications that any Nokia non-SEP (whether on a stand-alone basis or as a  thicket)
   is indispensable for device manufacturers to compete on the market.

261) Second, Nokia's incentive to assert its non-SEPs is not merger-specific. Nokia has sought in the  past,  and  currently  seeks,  injunctions
   against undertakings which allegedly infringed Nokia's non-SEPs. In doing so, Nokia has been characterized as aggressive by  some  competitors
   responding to the market investigation. Examples of litigation against smart mobile device manufacturers involving some  of  Nokia's  non-SEPs
   include HTC and Blackberry (formerly RIM).[111]

262) Third, the proposed transaction may also have pro-competitive effects regarding the licensing of Nokia’s non-SEPs. This is due to  the  fact
   that while Nokia [information regarding Nokia's past licencing policy for its non-SEPS], it is currently "exploring opportunities  to  broaden
   its licensing programme" post-transaction. While the proposed transaction does not as such impact the value  of  Nokia’s  non-SEPs,  what  may
   change is that some of Nokia's non-SEPs may now be licensed to third parties in return for appropriate consideration.

263) Finally, Microsoft has confirmed to the Commission that, there  are,  and  have  been,  no  documents,  discussions  or  agreements  between
   Microsoft and Nokia dealing with Nokia's post-transaction conduct in relation to the licensing of its non-SEPs to third parties, including any
   possible direct or indirect involvement of Microsoft in Nokia's future decision-making  in  this  regard  and/or  any  Microsoft's  direct  or
   indirect entitlement in any of Nokia's future revenues from the licensing of its non-SEPs.

       CONCLUSION

264) For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
   internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

For the Commission
(Signed)
Joaquín ALMUNIA
Vice-President

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.

[2]   For the purposes of this Decision, non-SEPs are defined as patents  that  are  not  technically  indispensable  to  be  able  to  implement
standardised technology.

[3]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p1).

[4]   Basic phones are used primarily for calls and text messaging (“SMS”). Feature phones are wireless phones  with  limited  Internet  browsing
      and application capabilities. Smartphones are wireless phones with advanced Internet browsing and application capabilities.

[5]   Tablets offer enhanced multimedia and functionality to the end-user.

[6]   BYOD, as the name implies, refers to a policy whereby employees are allowed to use compatible personal smartphones  for  business  purposes
such as email and the syncing of calendar and contacts.

[7]   Case COMP/M.6381 – Google / Motorola Mobility, Commission decision of 13 February 2012, paragraphs 41-42.

[8]   See replies to questionnaire Q1 to competitors of 29 October 2013, question 5.

[9]   See replies to questionnaire Q1 to competitors of 29 October 2013, question 6.

[10]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 7.

[11]  Case COMP/M.6381 – Google / Motorola Mobility, Commission decision of 13 February 2012, paragraph 29.

[12]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 8.

[13]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 9.

[14]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 10.

[15]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 11 and replies to Q2 to developers of  apps  for  smart  mobile
devices, question 10.

[16]  As one respondent to the market investigation indicated, increased functionality is delivered  in  tablet  apps  along  with  more  complex
designs due to the larger screen size. With the recent trend of the screen size of smartphones getting  larger  and  the  tablet  screen  getting
smaller, as well as constant improvements in smartphone performance capabilities, the differences in features, functionality and price  of  these
two categories is becoming less significant. Many mobile apps operate on both types of devices.

[17]  ChatON, Facebook, Fring, Nimbuzz, Skype, Viber, WeChat and Yahoo are all available for iOS, Android, Blackberry and  Windows  Phone.  ooVoo
and Tango are available for iOS and Android, and AOL and Trillian are available for iOS, Android and Blackberry.

[18]  Case COMP/M.6281, decision of 7 October 2011, paragraphs 10-43.

[19]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 17 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 16.

[20]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 16 and replies to Q2 to developers of  apps  for  smart  mobile
devices, question 15 of 30 October 2013.

[21]  IM is a form of real-time short text messaging. IM includes presence which is  the  ability  to  detect  other  users'  availability  (i.e.
whether they are online, absent or busy).

[22]  Voice calls refer to VoIP calls and mean the delivery of voice services over networks based wholly or partly  on  Internet  protocol.  VoIP
calls differ technically from PSTN calls.

[23]  Video calls enable users from at least two or more locations to interact using two-way  synchronized  video  and  voice  transmissions.  To
allow video calls, a device requires webcam and microphone functionality.

[24]  Case COMP/M. 3216, decision of 26 October 2004, paragraphs 15.

[25]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 13 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 12.

[26]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 12 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 11.

[27]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 37 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 26.

[28]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 37 and 38 and replies to Q2 to developers  of  apps  for  smart
mobile devices of 30 October 2013, questions 26 and 27.

[29]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 14 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 13.

[30]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 15 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 14.

[31]  IaaS is a provision model in which an organisation outsources the equipment  used  to  support  operations,  including  storage,  hardware,
servers and networking components. The service provider owns the equipment and is responsible for housing, running and maintaining it.

[32]  SaaS is a software distribution model in which applications are hosted by a vendor or service provider  and  made  available  to  customers
over a network, typically the Internet.

[33]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 18, replies to questionnaire Q3 to  Microsoft  Exchange  Server
      and Exchange ActiveSync Competitors of 30 October 2013, question 5, and replies to questionnaire Q4 to Microsoft Exchange Server  Customers
      of 30 October 2013, question 5.

[34]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 19, replies to questionnaire Q3 to  Microsoft  Exchange  Server
and Exchange ActiveSync Competitors of 30 October 2013, question 6, and replies to questionnaire Q4 to Microsoft Exchange Server Customers of  30
October 2013, question 6.

[35]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 20, replies to questionnaire Q3 to  Microsoft  Exchange  Server
and Exchange ActiveSync Competitors of 30 October 2013, question 7, and replies to questionnaire Q4 to Microsoft Exchange Server Customers of  30
October 2013, question 7.

[36]  See reply by Blackberry to questionnaire Q1 to competitors of 29 October 2013, question 20.

[37]  Case COMP/M.6381 Google / Motorola Mobility, Commission decision of 13 February 2012, paragraphs 43 to 47; and  Case  COMP/M.4942  Nokia  /
Navteq, Commission decision of 2 July 2008, paragraph 140.

[38]  See replies to questionnaire Q1 to competitors of 29 October 2013, questions 21 and 22.

[39]  Case COMP/M.6381 Google / Motorola Mobility, Commission decision of 13 February 2012, paragraphs 31 to 36.

[40]  Case COMP/M.6281 - Microsoft/ Skype, Commission Decision of 7 October 2011, paragraphs 64 to 68.

[41]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 25, replies to questionnaire Q3 to  Microsoft  Exchange  Server
and Exchange ActiveSync Competitors of 30 October 2013, question 8, and replies to questionnaire Q4 to Microsoft Exchange Server Customers of  30
October 2013, question 10.

[42]  For the sake of completeness, it is noted that vertical customer foreclosure theories resulting from the proposed  transaction  (concerning
the possible inability for third party OS suppliers and app developers to access the D&S' smart mobile devices) can be  ruled  out  because:  (1)
the D&S' smart mobile devices already exclusively use Microsoft's OS and hence the proposed transaction does  not  result  in  a  restriction  of
access by third party OS suppliers to these devices; and (2) the limited market share of  the  D&S  Business'  devices  (less  than  5%  in  both
smartphones and tablets: [0-5]% at worldwide and [0-5]% at EEA-level respectively, but also in smartphones only: [0-5]% worldwide and  [0-5]%  at
EEA-level).

[43]  See Non-Horizontal Merger Guidelines, paragraph 35.

[44]  See Non-Horizontal Merger Guidelines, paragraph 50.

[45]  See Non-horizontal merger guidelines, paragraph 25.

[46]  See Guidelines on the assessment of non-horizontal mergers  under  the  Council  Regulation  on  the   control  of  concentrations  between
undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265, 1      8.10.2008, p. 11, paragraph 32.

[47]  See Non-Horizontal Merger Guidelines, paragraph 32.

[48]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 32.

[49]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 32.

[50]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 26 and 29.

[51]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 28.

[52]  See replies to questionnaire Q1 to competitors of 29 October 2013, questions 34-36. For the  sake  of  completeness,  the  Commission  also
notes that the proposed transaction does not confer any competitive advantage on hardware suppliers using Microsoft’s Windows OSs over  suppliers
using competing mobile OSs. Microsoft has confirmed that third party hardware suppliers  using  its  Windows  OSs,  which  need  to  use  Nokia's
patented inventions (as all other hardware suppliers, which need to  use  such  inventions)  would  typically  need  to  [information  concerning
licensing requirements regarding Nokia’s SEPs].

[53]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 33.

[54]  Windows Messenger has been discontinued since April 2013 and replaced by Skype.

[55]  Entrants include Viber, ooVoo, Bistri, IMO, Friendcaller, Pattalk, VZOchat, Google  Hangouts,  Facebook,  Mail.Ru,  AOL,  Fring,  Trillian,
Nimbuzz, Tango, ICQ and Miranda.

[56]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 42 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 31.

[57]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 41 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 30.

[58]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 45 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 34.

[59]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 44 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 33.

[60]  See for instance Office Home&Student 2013 RT. As tablets have special needs for security and mobility, a few features  are  unavailable  in
      Office 2013 RT applications, including macros, add-ins, and other custom programs written by users  or  developed  by  third  parties.  See
      http://office.microsoft.com/en-us/home-and-student/office-2013-rt-faqs-FX103210361.aspx .

[61]  See http://appadvice.com/appnn/2013/07/sales-of-apples-iphone-soon-to-overtake-total-ipod-sales.

[62]  For the Windows 8 and Windows 8.1. tablets sold in 2012,  Microsoft  cannot  determine  how  many  had  Office  suite  installed  on  them,
      [information concerning installation tracking].

[63]        As       identified       in       a       study       by       Citrix        "Enterprise        mobility        cloud        report"
http://www.electronista.com/articles/13/03/28/study.highlights.differences.in.world.region.use.productivity.apps.

[64]  http://www.pcmag.com/encyclopedia/term/49780/productivity-software: “There are tons of word processing apps out there. Maybe too  many:  69
pop up if you search “word processor” in the App Store, and 240 show up in Google Play.”

[65]  Other productivity apps offerings on the market are: QuickOffice Pro HD, Documents to Go by RIM, Kingsoft  Office,  Olive  Office  Premium,
Office Suite 7+, Smart Office 2 by Picsel, Android Office by Sibling, and ThinkFree Office by Hancom.

[66]  According to data provided by Microsoft, only [20-30]% of Windows Phone users activated one or more of the Office Mobile apps.

[67]  A significant percentage of these […] installations may not convert to paying customers, as an Office 365 subscription is required  to  use
Office Mobile for Office 365 on Android.

[68]  See http://www.google.com/enterprise/apps/business/customers.html.

[69]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 39 and replies to Q2 to developers of  apps  for  smart  mobile
devices of 30 October 2013, question 28.

[70]  Microsoft submits that less than […] users had activated Mobile Office on Windows phone, iOS and Android phones by late August 2013.

[71]  The updated version of Doo was released in early September and was downloaded over 100 000  times  in  the  first  100  hours  of  release:
http://www.androidrundown.com/blog/doo-document-scanner-app-version-20-reaches-100000-combined-downloads-100-hours

[72]  Asus, Dell, HP, Nokia, Lenovo, Samsung, Toshiba.

[73]  The estimates for the EEA are a proxy based on Microsoft internal data from France, Germany, the UK, the Netherlands, Italy and Poland  for
the year ending in May 2013. The estimate for its worldwide share is a proxy based on internal data from 11 countries  (the  United  States,  the
United Kingdom, France, Germany, Canada, Brazil, Russia, India, China, Japan and Australia).

[74]  According to Microsoft, the “other on-premises mail server” services category includes Zimbra (UK, Germany, Italy and  Poland),  Exim  (UK,
Germany, France and Poland), MDaemon (UK and Italy), Kerio (Germany and the Netherlands), Dovecot (UK), Icewarp  (UK),  Tobit  (Germany),  XS4ALL
(the Netherlands).

[75]  Microsoft submits that Exchange Web Services protocol (EWS) could also feasibly be used  to  synchronise  contact  and  calendar  data  but
submits that it is more complicated to implement, not optimized for smart mobile devices and is therefore currently  implemented  by  few  mobile
email clients. In any case, EWS is also owned and licensed by Microsoft and therefore will not serve as a  competitive  constraint  to  EAS.  The
following assessment will therefore disregard EWS.

[76]  Notably [names of licensees].

[77]  While most mobile app developers (such as […]) have EAS Application licenses, […] of these companies ([…]) have  a  broader  licence  under
Microsoft's Interoperability Exchange license agreement that cover patents that read on the Exchange Server protocols, including EAS.

[78]  Based on IDC Worldwide Quarterly Mobile Phone Tracker data, and excluding Nokia's supplies, the aggregate EEA-wide volume market  share  of
supplies covered […] were [90-100]% in 2010, [80-90]% in 2011, and [80-90]% in 2012.  Companies  not  covered  include  […]  and  others.  As  to
smartphones supplied worldwide, the corresponding figures are [70-80]% in 2010, [70-80]% in 2011, and [60-70]% in 2012.

[79]  The Commission notes, however, that according to certain respondents to the market investigation network administrators  may  be  reluctant
for security reasons (e.g. the ability to remotely wipe devices, which is one of the features of that  can  be  implemented  by  using  EAS),  to
permit personal devices to access the corporate network unless the those devices implements EAS.

[80]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 47.

[81]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 48.

[82]  The OEM noted that Microsoft had terminated the EAS license with the email app provider Emtrace Technologies ("Emtrace")  in  2012  it  the
context of the patent dispute in relation to EAS between Motorola and Microsoft. Microsoft submits that it terminated Emtrace's 2007  licence  to
EAS for cause [information regarding reason for termination for cause].

[83]  See also footnote 77.

[84]  In other words, there is no EAS software code that Microsoft makes available to these third parties for  installation  on,  or  integration
into, a server, device, or application.

[85]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 46.

[86]  According to Microsoft, all of the functionality is documented in past and current EAS specifications that are publicly available.

[87]  See replies to questionnaire Q1 to competitors of 29 October 2013, questions 55, 60 and 61. See replies to questionnaire Q2  to  developers
of applications for smart mobile devices of 30 October 2013, questions 44, 49 and 50; See reply to questionnaire Q3 to Microsoft Exchange  Server
and Exchange ActiveSync Competitors of 30 October 2013, questions 17, 22 and 23. See reply to  questionnaire  Q4  to  Microsoft  Exchange  Server
Customers of 30 October 2013, questions 16, 17, 22 and 23.

[88]  See reply to questionnaire Q4 to Microsoft Exchange Server Customers of 30 October  2013,  question  16.  The  other  half  of  respondents
expressing an opinion stated that they would purchase or support only  smart  mobile  devices  supporting  full  synchronisation  with  Microsoft
Exchange Server. No customer said that they would enable synchronisation of email via Pop3, SMTP and/or IMAP protocols (nor could they use  these
protocols to enable synchronisation of calendar, tasks, or contacts as these protocols do not support this). Two customers expressed no opinion.

[89]  Idem.

[90]  See replies to questionnaire Q1 to competitors of 29 October 2013, question 51. Note that the majority      of  responding  competitors  do
not express a clear view on this question.

[91]  http://www.etsi.org/WebSite/document/Legal/ETSI_IPR-Policy.pdf.

[92]  See Commission Communication, Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements  (OJ  C  11,
14.1.2011, page 1-72), paragraph 263.

[93]  Ibid, paragraph 269.

[94]  See Commission Communication, Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements  (OJ  C  11,
14.1.2011, page 1-72), paragraph 287.

      Case C-238/87 Volvo v. Veng [1988] ECR 6211, paragraph 9; Joined Cases C-241/91 P and C-242/91  P RTE  and  ITP  v.  Commission  (‘Magill’)
      [1995] ECR I-743, paragraph 50; Case C-418/01 IMS  Health v. NDC Health [2004] ECR I-5039, paragraph 35; Case T-201/04 Microsoft [2007] ECR
      II-3601, paragraph 332.

[95]  Joined Cases C-68/94 and C-30/95 French Republic and Société commerciale des potasses et de     l'azote (SCPA) and  Entreprise  minière  et
chimique (EMC) v. Commission (“Kali und Salz”) [1998]    ECR I-1375, paragraph 171.

[96]  Case IV/M.1383 - Exxon / Mobil, Commission decision of 29 September, 1999, paragraphs. 225–229;      Case COMP/M.2434 - Grupo Villar Mir  /
      EnBW / Hidroelectrica del Cantabrico, Commission    decision  of  26  September,  2001;  Case  COMP/M.2684  –  EnBW  /  EDP  /  Cajastur  /
      Hidrocantabrico,       Commission decision of 19 March, 2002; Case COMP/M.4519 – Lagardère/ Sportfive, Commission decision  of  18  January
      2007, Case COMP/M.3696 - E.ON/ MOL, Commission decision of 21 December 2005.

[97]  This is without prejudice to the Commission’s power to review possible anti-competitive practices under the applicable antitrust  rules  in
separate proceedings. Such proceedings, based on Articles 101 or 102 TFEU, are  appropriate  tools  to  investigate  and  address  the  types  of
competition concerns that have been raised by some respondents.

[98]  See also Case C-12/03 P Commission v. Tetra Laval [2005] ECR I-987, paragraphs 79 and 84.

[99]  Commission Consolidated Jurisdictional Notice under Council  Regulation  (EC)  No  139/2004  on  the   control  of  concentrations  between
undertakings [2008] OJ C95/1.par. 129.

[100]       Article 6(2) Merger Regulation provides  that:  “Where  the  Commission  finds  that,  following  modification  by  the  undertakings
concerned, a notified concentration no longer raises serious doubts … it shall declare  the  concentration  compatible  with  the  common  market
pursuant to paragraph 1(b). The Commission may attach to its decision … conditions and obligations  intended  to  ensure  that  the  undertakings
concerned comply with the commitments they have entered into vis-à-vis the Commission ….” Article 6(3) of the Merger Regulation further  confirms
that commitments given under the Merger Regulation to ensure compatibility  of  the  concentration  with  Article  2  are  to  be  given  by  the
undertakings concerned. It provides that decisions taken under Article 6(1)(b) can be revoked when the “undertakings concerned” commit  a  breach
of the commitment. Similarly, Article 14(2)(d) gives the Commission the power to impose fines on  the  “undertakings  concerned”  (or  acquirers)
where they fail to comply with a condition or obligation imposed by decision under Article 6(1)(b).

[101]       Case IV/M. 1383 - Exxon / Mobil, Commission decision of 29 September 1999

[102]       Case COMP/M.2434 - Grupo Villar / EnBW / Hidroeléctrica del Cantábrico, Commission decision of 26 September 2001.

[103]       Case COMP/M.2684 - EnBW / EDP / Cajastur / Hidroeléctrica, Commission decision of 19 March,2002.

[104]       Case COMP/M.4519 – Lagardère/ Sportfive, Commission decision of 18 January 2007.

[105]       Case COMP/M.3696 - E.ON/MOL, Commission decision of 21 December 2005.

[106]           See      http://press.nokia.com/2013/11/04/samsung-extends-the-patent-license-agreement-between-nokia-and-samsung-for-five-years-
companies-will-enter-into-binding-arbitration-to-settle-the-amount-of-additional-compensation/.

[107]       See http://press.nokia.com/2011/06/14/nokia-enters-into-patent-license-agreement-with-apple/.

[108]       Certain respondents claimed that the NSN business is largely insulated from infringement suits because (i)  NSN  sells  its  products
directly to its customers (cellular carriers)  and  thus  Nokia's  potential  licensee's  do  not  have  access  to  NSN's  equipment,  rendering
investigating and bringing infringement suits difficult or impossible; and (ii) because infringement  suits  over  infrastructure  could  disrupt
carriers' operations, carries undoubtedly pressure suppliers to refrain from  bringing  them.  However,  [Nokia  information  on  NSN]  gives  an
indication that the NSN business is indeed exposed to patent infringement suits.

[109]       See Case COMP/M. 6381 Google / Motorola Mobility, Commission decision of 13 February 2012, paragraph 132. See  also  the  preliminary
view  expressed  by  the  Commission   in   Cases   COMP/AT.39.985   -   Motorola   -   Enforcement   of   GPRS   standard   essential   patents,
http://europa.eu/rapid/press-release_IP-13-406_en.htm  and  COMP/AT.39.939,  Samsung  -  Enforcement  of  UMTS   standards   essential   patents,
http://europa.eu/rapid/press-release_IP-12-1448_en.htm

[110]       [Information regarding these litigations].

-----------------------
                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE