Google And Motorola Essay

This $12. 5 unmatched million million deal is Googles first step into the wandering(a) braid hardw are commercialise and can at that placefrom be seen as a non-? pl ain or vertical fusion, as Google has been active in the grocery place at a different stage of the release bowed stringed instrument through the training of virtuoso of the major vigorous braid operating forms (OSs) android OS. This merger leave behind strengthen Googles stance in the grocery for liquid devices and go out mainly boost Googles apparent portfolio. Nearly one three of on the whole rambling device gross sales in 2011 were smartphones with a growth prise of 58 percent from 2010.In this chop-chop eveloping trade with such a eminent number of consumers, it is of great importance that there is high competitor in place to keep the prices low and to drive groundwork. As this market is as good as real global, just organisations all oer the world, for exemplar the coupled S tates Department of nicety or the European Commission need to check, whether a merger like the one that is presented in the following(a) could harm competition or development a firms market power in a market above an acceptable level.Additionally, this paper result face the question, whether the sinergies of this merger are enlarged enough to influence the competition ommissions lasts. In rove to answer these questions, this paper will firstly present the case and the decisions from both the European and the US point of view. Secondly, it will show an analysis of the economic stage setting of the case to trace the steps of the cardinal antitrust commissions and then, thirdly it will realise over with a competition analysis and a research for efficiency gains that justify the commissions decisions, followed by a short outlook.As an preceding part to this paper, I will give some general information somewhat the firms, their operations prior to the merger and a projectio n of their ombined incoming. I will as hale as present the notifying partys (i. e. Googles) reasons for wherefore they would like to acquire Motorola. Following this are the EU and U. S. decisions and a short snarf on the differences in their approaches. 1 2. 1 Google, Inc. Google is mainly k straightawayn as a provider of its internet search computer program and online advert operate.Founded by Larry Page and Sergey Brin in 1998, it became a publically traded comp severally in 2004 and since then it has become one of the biggest players in web-? based enterprises around the world. Its broad place of products goes from web search tools, via advertising services ike AdSense or AdWords, communication and publishing services, development resources, map-? re newd products, statistical tools and desktop uses to mobile applications and the operating systems mechanical man for mobile devices and ChromeOS for private computers. (Google, Inc. , 2012a) 2. 2 Motorola Mobility Hold ings, Inc. MMI, formerly the mobile devices instalment of Motorola Inc. , became its own publically traded comp both in January 2011. In the 1990s it was the pioneer of the overturn phone, the StarTac. With this and through its emphasis on this market segment it was able to develop its get hold of product, the super-? thin flip phoneMotorola RAZR. epoch these boosted its position in the analogue mobile phone market for a while, MMIs slow adaption to digital technology make it lose the race to its rivals, e. g. Sony Ericsson or Nokia, in the beginning of the 21st century (Motorola Mobility Holdings, Inc. , 2010). Its market share began to drop with a mark $1. 2 billion loss in 2007 and continued to drop in the long time thereafter towards 2. 7 percent in 2010. This, amongst new(prenominal) issues, has led some muckle to believe that Motorola was nearing bankruptcy. (Gartner, Inc. , 2011) 2. 3 Reasons for a conjugation In its own press release, Google Inc. (2012) states the a in benevistas of the deal to be 1. An acceleration of installation and choice in mobile calculation through which consumers will get fall apart phones at lower prices and 2.A bulwark of the Android Ecosystem through Motorolas overt portfolio, which guarantees Android to stay vindicated-? source software, which is decisive to completion in the mobile device space, as it is ensuring hardware manufacturers, application developers, mobile phone carriers and consumers all to have choice. Since 2008 Motorola has richly implemented the Android operating system for their 2 smartphones, which creates a natural fit between the two companies Google, Inc. , 2012b, p. 1). This, as well as Motorola being a member of the turn over Handset Alliance (OHA), a crime syndicate to create open standards for mobile devices, which now includes 84 firms from every part of the supply chain, will enable faster innovation. some different point that Google stresses in their facts almost the acquirem ent is the long history of innovation in communications technology at Motorola Mobility and to boot the development of intellectual property.The latter is very important to Google as it will concur their own, so far very small, open portfolio to defend Android OS against the unattackable competition rom orchard apple tree and Microsoft, which is well explained in an extra paragraph in their press release. It is very important to Google to game the constant competition it has injected into the smartphone market since the base of the first Android phone in 2008. They are trying to give consumers, application developers, and mobile carriers high-? quality alternatives to products like orchard apple tree? s iPhone and iPad and RIMs blackberry bush (Google, Inc. , 2012b, p. 2). Google especially highlights what they will not be trying to do with the merger, in order to keep competitors and consumers calm. They do not deficiency to close the Android cosystem and favour Motorola over other hardware manufactures.The Android OS will stay available to everyone on an open source basis. Google will also not force their partners to use Google search (in order to boost their own advertising revenues). 2. 4 The EU Decision The European Commission (EC) was notified of the proposed merger in late November 2011. Since Google and Motorola Mobility have a combined world-? childlike swage exceeding 5 billion and each have an EU-? wide turnover of more than 250 million, as well as neither one company is achieving more than two-? thirds of its EU-?Wide turnover within one European ountry, the merger has an EU place and has therefore to be drop outed by the EC. In their analysis of whether the merger would bring about competition issues, the EC concluded to focus on the vertical relationships between Google as the supplier of the open source Android OS and online services on the one hand and Motorola Mobility as a supplier of mobile devices and holder of important cerebr al Property Rights for mobile devices on the other hand (European Commission, 2012, p. 4).The EC splits its initial market analysis into three parts foremost it focusses on the market for operating systems, second it analyses he market for mobile devices and thirdly it discusses the Standard Essential Patents (SEPs) 3 Google acquires from MMI. With their market analysis they conduct a competition analysis and conclude in all areas that the merger does not raise any competition issues, which can also be seen in the economic analysis that follows later. Their decision therefore is to drop the investigation and allow the deal to go through without any remedies or changes to be made. 2. 5 The US DecisionThe United States Department of Justice (DOJ) has approached the case in a standardised, however, jolly different way. It combined the investigations f the merger case with sciences of certain patents by Apple Inc. , Microsoft Corporation and Research In crusade Ltd. , as all of the se were linked to each other. In their analysis, the DOJ followed a similar approach to the EU, checking, whether the proposed acquisitions would create incentives and abilities for the acquiring firms to tip ambiguities in the SSOs F/RAND fair/ reasonable and non-? anti-Semite(prenominal) scathe licensing commitments to hold up rivals, this preventing or inhibiting innovation and competition (U. S. Department of Justice, 2012, p. 2). In terms of Microsoft Corp. s and Apples acquisition ofNortel patents, the divisions concerns were lessened by the clear commitments by Apple And Microsoft to endorse SEPs (U. S. Department of Justice, 2012, p. 1) on FRAND terms, as well as their commitments not to seek injunctions in disputes involving SEPs. However, the Department of Justice identifies Googles commitments to be less clear. The Department refers to Googles open earn to all Standard condition Organizations (SSOs) and argues that Googles statement does not at once provide the sam e assurance, as for example the other companies mentioned before.Google for example mentions in their letter that it will not seek njunctions for the violation of SEPs against a competitor, however exactly for disputes involving future license revenues, and only if the counterparty forgoes certain defenses such as challenging the validity of the patent pays the full disputed amount into escrow and agrees to a reciprocal assurance as the other companies statements concerning the exercise of its newly acquired patent rights (Lo, 2012, p. 3). These are, however, only reasons for the Department to decide on nevertheless monitoring of how competitors are exercising their patents, in order to identify potential misuses of the SEPs and not to prohibit the merger.