European Commission Suspends Probe into Microsoft-Backed ContentGuard Deal

Strategic Insights -

The European Commission has suspended its in-depth investigation into Microsoft Corp.'s and Time Warner Inc.'s plan to purchase stakes in Bethesda, Md.-based ContentGuard Inc. The Commission's decision to stop the clock is based on the companies' request to gather more information, which regulators say is still missing. This move gives the buyers more time to close a deal in which Thomson SA, Microsoft, and Time Warner would each take 33% stakes. The Commission had initially opened an in-depth probe in August to examine whether the tie-up would strengthen Microsoft's position in the digital rights management market.

Key Takeaways:

  • The European Commission has suspended its in-depth probe into Microsoft and Time Warner's plan to purchase stakes in ContentGuard Inc.
  • The Commission is seeking additional information from the companies involved, which is related to market data and not the recent addition of Thomson SA as an investor.
  • The request to gather more information has stopped the clock on the original investigation, allowing the buyers more time to close the deal.
  • Time Warner and Microsoft jointly acquired ContentGuard in April, and the terms of the deal were not disclosed.
  • Xerox Corp. has reported an after-tax gain of $83 million from the sale of most of its stake in ContentGuard.
  • The companies involved have not given a specific timetable for completing the new deal, but will have to notify the new transaction in Brussels, triggering a new one-month, first-stage review.
  • The Commission had initially opened an in-depth probe in August to examine whether the tie-up would strengthen Microsoft's position in the digital rights management market.
  • Regulators were worried that under the new owners, ContentGuard may have the incentive and the ability to put Microsoft's rivals at a competitive disadvantage.
  • ContentGuard's technology is used to prevent the illegal copying of music, films, and sensitive documents distributed via the internet.

Statistics:

  • 33% - The percentage of stakes that Thomson SA, Microsoft, and Time Warner would each take in the new deal.
  • 33% - The percentage of stakes that each of the three companies would take in the original deal with Xerox Corp.
  • $83 million - The after-tax gain reported by Xerox Corp. from the sale of most of its stake in ContentGuard.
  • 2000 - The year in which Xerox Corp. spun off ContentGuard.
  • Aug - The month in which the Commission initially opened an in-depth probe into the deal.
  • Jan 6 - The original deadline by which the Commission was due to issue a verdict on the deal.
  • 30 - The length of time (in days) of the new first-stage review if the Commission decides to proceed with the deal.

Sources:

  • TheDeal.com
  • Jonathan Todd, European Commission spokesman
  • Xerox Corp.