Brussels, 25/08/2004 (Agence Europe) - The European Commission has decided to open an in-depth investigation into the proposed joint acquisition by Microsoft and Time Warner of a US company called ContentGuard. ContentGuard is active in the development and licensing of intellectual property rights (IPRs) relating to Digital Right Management (DRM) solutions. DRM technology makes it possible to “hardwire” in digital content the content owner's rights, and to prevent illegal use (such as illegal copying). After a preliminary review, it appears to the Commission that the transaction might possibly create or strengthen a dominant position by Microsoft in the market for DRM solutions and the Commission will also investigate further competition concerns related to the vertical integration of Microsoft in other markets.
Originally focussed on avoiding piracy of audio digital content, DRM is forecasted to be increasingly used for confidentiality purposes, in particular to secure exchange of documents in the corporate field. The original deadline for the investigation was extended by two weeks to assess the concessions made by Microsoft and Time Warner, but Competition spokesperson Amelia Torres told reporters that the Commission's concerned had not been fully addressed. After a routine, phase one, review, the Commission has decided to investigate whether the deal might create or strengthen Microsoft's already leading position in the DRM solutions market. Under Microsoft's and Time Warner's joint ownership, ContentGuard may have both the incentives and the ability to use its IPR portfolio to put Microsoft's rivals in the DRM solutions market at a competitive disadvantage. This joint acquisition could also slow down the development of open interoperability standards. As such, this would allow the DRM solutions market to “tip” towards the current leading provider, Microsoft. DRM solutions are forecasted to become pervasive throughout the entire IT industry. As a consequence, the notified concentration may have spill-over effects on a number of related markets ranging from mobile telephony to word processors. The Commission must reach its final decision in the next 90 days.