Mergers: Commission approves acquisition of LinkedIn by Microsoft, subject to conditions
The European Commission has approved under the EU Merger Regulation the proposed acquisition of LinkedIn by Microsoft. The decision is conditional on compliance with a series of commitments aimed at preserving competition between professional social networks in Europe.
Commissioner Margrethe Vestager, in charge of competition policy, yesterday said: "A growing number of Europeans subscribe to professional social networks. These networks are important for professionals to connect and interact and to find new career opportunities. Today's decision ensures that Europeans will continue to enjoy a freedom of choice between professional social networks."
The Commission's investigation
Microsoft and LinkedIn are mainly active in complementary business areas, except for minor overlaps in online advertising. The Commission's investigation under EU merger rules focused in particular on three areas: (i) professional social network services, (ii) customer relationship management software solutions, and (iii) online advertising services.
Professional social network services
The Commission looked at whether, after the merger, Microsoft could use its strong market position in operating systems (Windows) for personal computers (PCs) and productivity software (including Outlook, Word, Excel and Power Point) to strengthen LinkedIn's position among professional social networks.
In particular the Commission was concerned that Microsoft would:
- pre-install LinkedIn on all Windows PCs; and
- integrate LinkedIn into Microsoft Office and combine, to the extent allowed by contract and applicable privacy laws, LinkedIn's and Microsoft's user databases. This could have been reinforced by shutting out LinkedIn's competitors from access to Microsoft's application programming interfaces, which they need to interoperate with Microsoft's products and to access user data stored in the Microsoft cloud.
The Commission found that these measures could have significantly enhanced LinkedIn's visibility whilst competing professional social networks could potentially be denied such access. As a result, LinkedIn would have been able to expand its user base and activity in a way that it would not have been able to do absent the merger.
The Commission was concerned that the increase in LinkedIn's user base would make it harder for new players to start providing professional social network services in the European Economic Area (EEA). Furthermore, it could have gradually and irreversibly tipped the market towards LinkedIn in Member States where a competitor of LinkedIn currently operates (such as Austria, Germany or Poland).
Customer relationship management software solutions
The Commission looked at whether after the merger Microsoft would be able to shut out its competitors by:
- obliging customer relationship management customers buying LinkedIn's sales intelligence solutions to also purchase Microsoft's customer relationship management software; and
- denying its competitors access to the full LinkedIn database, thus preventing them from developing advanced customer relationship management functionalities also through machine learning.
On the first concern, the Commission found that while the customer base of the two products does overlap, LinkedIn's product is one of several on the market and does not appear to be a "must have" solution.
On the second concern, the Commission also found that access to the full LinkedIn database is not essential to compete on the market.
Moreover, Microsoft is a relatively small player in the customer relationship management market, where it faces strong competitors, such as Salesforce, the clear market leader, Oracle and SAP.
The Commission therefore considered it unlikely that the transaction would enable Microsoft to foreclose these players and eliminate competition in this market.
Online advertising services
With respect to online advertising services, the companies' activities only overlap in relation to display advertising. However, given their very limited combined market share in the EEA, as well as the fragmented nature of the market, the Commission excluded any competition concerns arising from the combination of the parties' online non-search service activities.
Moreover, no competition concerns arise from the concentration of the parties' user data that can be used for advertising purposes. This is because a large amount of such user data will continue to be available on the market after the transaction. In addition, the transaction would not reduce the amount of data available to third parties as neither Microsoft nor LinkedIn currently makes available its data to third parties for advertising purposes.
The Commission analysed potential data concentration as a result of the merger with regard to its potential impact on competition in the Single Market. Privacy related concerns as such do not fall within the scope of EU competition law but can be taken into account in the competition assessment to the extent that consumers see it as a significant factor of quality, and the merging parties compete with each other on this factor. In this instance, the Commission concluded that data privacy was an important parameter of competition between professional social networks on the market, which could have been negatively affected by the transaction.
The proposed commitments
To address the competition concerns identified by the Commission in the professional social network services market, Microsoft offered a series of commitments. These commitments include:
- ensuring that PC manufacturers and distributors would be free not to install LinkedIn on Windows and allowing users to remove LinkedIn from Windows should PC manufacturers and distributors decide to preinstall it.
- allowing competing professional social network service providers to maintain current levels of interoperability with Microsoft's Office suite of products through the so-called Office add-in program and Office application programming interfaces.
- granting competing professional social network service providers access to "Microsoft Graph", a gateway for software developers. It is used to build applications and services that can, subject to user consent, access data stored in the Microsoft cloud, such as contact information, calendar information, emails, etc. Software developers can potentially use this data to drive subscribers and usage to their professional social networks.
The commitments will apply in the EEA for a period of five years and will be monitored by a trustee.
These commitments address the competition concerns identified by the Commission. The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon full compliance with the commitments.
Companies and products
Microsoft is a global technology company based in US which develops, licenses, and supports software products, services and devices. Microsoft's products include operating systems for PCs, servers, and mobile devices (branded "Windows"), cross-device productivity applications (branded "Office"), video games, as well as cloud-based solutions and online advertising. Microsoft also provides other software solutions, including customer relationship management (branded "Dynamics"), which is a type of software used by businesses to manage their sales, marketing and customer support activities.
LinkedIn is a US based company that operates the homonymous Internet-based social networking service that focuses on promoting professional connections. Professional social network services are offered as free of charge basic subscriptions or premium subscriptions. Among premium subscriptions, LinkedIn offers a sales intelligence solution for businesses branded "Sales Navigator." This product grants access to a subset of the entire LinkedIn database that can be purchased by businesses that also buy customer relationship management solutions. LinkedIn also provides recruiting tools and online education courses as well as it offers advertising space to individuals and enterprises.
Merger control rules and procedures
The transaction was notified to the Commission on 14 October 2016.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
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