Google And Motorola Essay

This $12. 5 billion deal is Googles original step into the busy device ironware commercialise and can and then be seen as a non-? horizontal or vertical nuclear fusion, as Google has been active in the market at a different spirit level of the supply chain by the development of one of the major spry device in operation(p)(a) systems (OSs) android OS. This nuclear fusion reaction go away strengthen Googles stance in the market for spry devices and go forth mainly win Googles patent portfolio. Nearly one third of whole mobile device sales in 2011 were smartphones with a growth rate of 58 percent from 2010.In this rapidly eveloping market with such a lofty number of consumers, it is of great importance that there is high competition in order to keep the prices low and to drive innovation. As this market is to a fault very global, antimonopoly organisations all over the world, for example the United States segment of Justice or the European Commission need to check, whe ther a nuclear fusion reaction like the one that is presented in the following could harm competition or increase a firms market power in a market above an accept adequate level.Additionally, this paper will calculate the question, whether the sinergies of this merger are big enough to influence the competition ommissions decisions. In order to answer these questions, this paper will firstly present the sideslip and the decisions from both the European and the US point of view. Secondly, it will show an abbreviation of the economic background of the case to trace the steps of the two antitrust commissions and then, thirdly it will conclude with a competition psycho psycho analysis and a search for efficiency gains that justify the commissions decisions, followed by a little outlook.As an introductory part to this paper, I will give some popular information about the firms, their operations prior to the merger and a acoustic projection of their ombined future. I will too pre sent 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 abstract on the differences in their attackes. 1 2. 1 Google, Inc. Google is mainly cognize as a provider of its internet search platform and online denote services.Founded by Larry Page and Sergey Brin in 1998, it became a publically traded telephoner in 2004 and since then it has become one of the biggest players in web-? based enterprises around the world. Its vast range of products goes from web search tools, via advertising services ike AdSense or AdWords, discourse and publishing services, development re citations, map-? related products, statistical tools and desktop applications to mobile applications and the operating systems android for mobile devices and ChromeOS for personal computers. (Google, Inc. , 2012a) 2. 2 Motorola Mobility Holdings, Inc. MMI, formerly the mobile devices segment of Motorola Inc. , be came its receive publically traded comp whatever in January 2011. In the 1990s it was the lead up of the flip phone, the StarTac. With this and through its centralize on this market segment it was able to develop its hit product, the super-? thin flip phoneMotorola RAZR. While these boosted its identify in the analogue mobile phone market for a while, MMIs slow adaption to digital technology made 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 have with a record $1. 2 billion loss in 2007 and go on to drop in the years thereafter towards 2. 7 percent in 2010. This, amongst some other issues, has led some people to believe that Motorola was nearing bankruptcy. (Gartner, Inc. , 2011) 2. 3 Reasons for a Merger In its own press release, Google Inc. (2012) states the ain bene rack ups of the deal to be 1. An acceleration of innovation and choice in mobile computi ng through which consumers will get better phones at lower prices and 2.A security of the Android Ecosystem through Motorolas patent portfolio, which guarantees Android to stay devote-? reference work software, which is vital 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 fully utilize the Android operating system for their 2 smartphones, which creates a natural fit between the two companies Google, Inc. , 2012b, p. 1). This, as surface as Motorola being a element of the Open Handset Alliance (OHA), a consortium to create open standards for mobile devices, which now includes 84 firms from every part of the supply chain, will enable faster innovation. Another point that Google stresses in their facts about the science is the long history of innovation in communications technology at Motorola Mobility and additionally the development of in tellectual property.The latter is very great to Google as it will support their own, so far very small, patent portfolio to stand Android OS against the strong competition rom Apple and Microsoft, which is well explained in an extra paragraph in their press release. It is very important to Google to support the constant competition it has injected into the smartphone market since the introduction of the first Android phone in 2008. They are trying to give consumers, application developers, and mobile carriers high-? quality alternatives to products like Apple? 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 want 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 Goog le search (in order to boost their own advertising revenues). 2. 4 The EU conclusiveness The European Commission (EC) was notified of the proposed merger in late November 2011. Since Google and Motorola Mobility have a combined world-? wide upset exceeding 5 billion and each have an EU-? wide turnover rate 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 dimension and has therefore to be allowed 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 Intellectual holding Rights for mobile devices on the other hand (European Commission, 2012, p. 4).The EC splits its initial market analysis into three part s Firstly it focusses on the market for operating systems, secondly it analyses he market for mobile devices and thirdly it discusses the Standard infixed 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 surgical incision of Justice (DOJ) has approached the case in a similar, however, just about different way. It combined the investigations f the merger case with acquisitions of real patents by Apple Inc. , Microsoft Corporation and Research In Motion Ltd. , as all of these were linked to each other. In their analysis, the DOJ followed a similar approach to the EU, checking, whether the proposed acquisitions wou ld create incentives and abilities for the acquiring firms to exploit ambiguities in the SSOs F/RAND fair/ reasonable and non-? homophobic terms 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 license 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 letter to all Standard Setting Organizations (SSOs) and argues that Googles disputation does not directly provide the same assurance, as for example the other companies mentioned before.Google for example mentions in their letter that it will not seek njunctions for the misd emeanour of SEPs against a competitor, however only 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 repugn amount into escrow and agrees to a reciprocal assurance as the other companies statements concerning the deterrent example of its newly acquired patent rights (Lo, 2012, p. 3). These are, however, only reasons for the Department to decide on advertise monitoring of how competitors are exercising their patents, in order to identify capableness misuses of the SEPs and not to prohibit the merger.