On March 29, the DOJ announced that it will not challenge Cisco Systems Inc.’s acquisition of Tandberg ASA. The EU also cleared the transaction, however, it required conditions for its approval.
The DOJ concluded that the proposed deal was not anticompetitive because of the evolving nature of the videoconferencing market and the commitments that Cisco made to the European Commission (EC) to facilitate interoperability.
During the course of its investigation, the DOJ cooperated closely with the EC in its parallel review of the transaction, aided by waivers from the parties and industry participants. This permitted the agencies to share information of likely competitive effects and potential remedies. Regulators on both sides of the Atlantic agree that this investigation was a model of international cooperation between the United States and the European Commission.
The Antitrust Division analyzed the effect of combining the videoconferencing businesses of Cisco and Tandberg, focusing on a type of videoconferencing known as “telepresence,” in which Cisco and Tandberg were two of a small handful of competitors. Telepresence is a form of high-definition videoconferencing that provides an immersive experience to users, simulating face-to-face meetings. The market is highly concentrated yet the Antitrust Division was comfortable in allowing the transaction to go forward especially given the EU’s settlement with Cisco. Cisco made commitments to facilitate interoperability between its telepresence products and those of other companies as part of the EC’s merger clearance process.
The DOJ commented that the EU settlement agreement is designed to foster the development of open operating standards. The DOJ views those commitments as a positive development that will enhance competition among producers of telepresence systems. Open standards lower barriers to entry, and can be especially procompetitive in rapidly evolving high technology markets. The DOJ indicated that it took the commitments into account, along with various market factors, such as the evolving nature of the telepresence business, in reaching its decision to close its investigation.
The DOJ’s decision to not challenge the transaction is noteworthy because Cisco’s acquisition gives it a very high share of the telepresence market in a concentrated market. The decision demonstrates that this administration is not much different from the old administration in terms of challenging mergers. Moreover, the DOJ did not enter into a settlement agreement with Cisco as it relies on Cisco’s commitment to the EU that it will license proprietary technology that may enable competitors to interoperate with Cisco’s and Tandberg’s telepresence systems. While there has been a lot of rhetoric regarding stronger antitrust enforcement by the DOJ, the DOJ does not appear to be willing to block mergers, not yet anyway.