SEJONG, Feb. 5 (Korea Bizwire) — South Korea’s antitrust authority said Thursday it reopened a review on the merger between Microsoft Corp. and Nokia’s devices and services business to preempt any potential market distortions and ensure fair competition.
In the “consent decree process” expected to last at least three months, the Fair Trade Commission (FTC) aims to obtain assurances that Microsoft will not use the merger to discriminate against local mobile phone makers by exploiting its extensive standard essential patents (SEP), which can affect the operations of Android phones.
Microsoft first asked the FTC to review the merger in late August 2014. Deliberations, however, were suspended after the first review meeting in mid-September because the issue involved highly specialized technical and business issues. Also, Microsoft needed time to sort out problems with local partners.
“Microsoft had asked for more time so it could voluntarily address some of the concerns raised and make adjustments to the existing contracts with South Korean companies,” FTC commissioner Ji Chul-ho said.
Time was also needed to define the geographical boundaries that would be affected, he said.
“Based on the changes put forward by the tech company, the FTC held a meeting on Wednesday and agreed to resume deliberations,” the official said.
The review itself will not affect the 7.8 trillion won (US$7.2 billion) merger deal reached in September 2013 that has already been finalized and approved by regulators in the United States, European Union, China and Taiwan, according to Ji. Microsoft had reported its merger with the handset maker to the FTC two months after the deal was reached.
“Microsoft has said that even if it makes phones on its own (through Nokia), it will not raise prices on patents for seven years or take any other step to disrupt fair market competition,” the official said. He added that Microsoft made clear it will not put companies that already have signed cooperative contracts at a disadvantage in the future.
Microsoft did not specify any companies, but it does have development agreements with South Korean smartphone producers to make Windows phones.
Microsoft launched its own Windows phones in the past, but the volume and market share was not enough to pose any problems. This, however, changes with the Nokia deal, which can potentially place it in direct competition with local companies, such as Samsung Electronics Co. and LG. These two companies mainly make Android devices.
Nokia’s own patent in the mobile phone sector has further fueled concerns of discrimination and unfair trading practices.
The FTC said Microsoft has key patents in telecommunications and Exchange ActiveSync (EAS) protocol that allow smartphones to open emails.
Once the final consent is given, following more deliberation and talks between Microsoft and its business partners, as well as various South Korean government ministries, the FTC will ensure that the company follows through on its promises and does not take steps to restrict fair competition.
Any violations will be dealt like any other market restrictive action through fines and administrative action, the commission said.