European Court Upholds Microsoft's Skype Takeover

European regulators reject legal challenge by Cisco claiming Microsoft's $8.5 billion takeover created a new monopoly.

Europe's second highest court upheld a decision on Wednesday approving Microsoft's $8.5 billion takeover of Internet video messaging company Skype in 2011.

European Union regulators cleared the deal but network equipment maker Cisco filed a legal challenge, claiming the takeover would create a new monopolist and was unfair to established telecoms and networks operators. Cisco filed its challenge together with Italian fixed-line and Internet telephone provider Messagenet, which is a Skype competitor.

But on Wednesday, the EU judges ruled in Microsoft's favor, saying Cisco failed to show that the takeover would harm competition.

"Microsoft's acquisition of Skype is compatible with the internal market. The merger does not restrict competition either on the consumer video communications market or on the business video communications market," the judges at the Luxembourg-based General Court said.

Cisco and Messagenet can still appeal the ruling to the EU Court of Justice.

The Microsoft/Skype case is being watched careful in Europe as cheaper Internet-based voice and video services are beginning to grab market share from established telco operators across the continent.

The European Union is known for its tough antitrust stance. Earlier this year, the EU fined Microsoft $731 million for failing to offer its users a choice of web browser.