On 11 December 2013, the Commission's approval of Microsoft's acquisition of Skype survived a challenge brought by two competing producers of internet-based communications services and software: Cisco and Messagenet (case T-79/12).
The Commission had cleared the concentration in 2011 after Phase I investigations, finding that the acquisition did not give rise to competition concerns even on the narrowest possible definition of the relevant product markets. In one of these markets – the market for consumer video communications on Windows-based PCs – the new entity would have a combined market share of 80-90%.
On 11 December 2013, the General Court agreed with the Commission that the merged entity would not acquire a degree of market power which would enable it to significantly impede competition in the internal market and dismissed Cisco's and Messagenet's action. Noteworthy is the Court's acceptance of innovation as an important competitive parameter and disciplining factor in dynamic markets.
Key in the Court's analysis was the fact that the consumer communications sector could be characterized as "a recent and fast-growing sector" with "short innovation cycles". Market shares in innovative sectors are known to be volatile, because the introduction of a new generation of products may allow smaller competitors to capture the entire new market, leaving the incumbent no other choice but to exit. Moreover, not innovating is a hazardous strategy as well, as a firm that does not invest in innovation runs the risk of not being able to catch up with rivals that do. Thus, the Court concluded that: "in such a dynamic context, high market shares do not necessarily indicate market power."
