FTC conditionally approves Microsoft-Nokia deal
By Kim Yoo-chul
The Fair Trade Commission (FTC) said Thursday that it issued a conditional approval of Microsoft’s acquisition of Nokia’s handset business.
The merger is conditioned that the U.S.-based licensing giant will cap the royalties major Korean handset manufacturers such as Samsung and LG Electronics pay for Nokia-owned patents.
“MS agreed to ask local handset manufacturers to pay royalties based on the fair, reasonable and non-discriminatory (FRAND) principle over the next seven years. There won't be additional charges above the ceiling during the period,” said an FTC official.
MS's Nokia devices division will be entitled to maintain its current royalty rates after the acquisition.
The decision comes after the regulator accepted requests by MS to open the official settlement process to resolve the issue.
In November 2013, MS submitted papers for approval of its acquisition of Nokia's mobile phones.
In a statement to The Korea Times, MS said, “We welcome the FTC's decision to open the settlement process to resolve its investigation of MS's acquisition of Nokia's devices and services business. We look forward to working with the FTC in the coming weeks to reach a final resolution.”
The merger between the two companies is subject to FTC endorsement because it may hurt fair competition in the local handset industry.
The MS-Nokia deal means MS would directly manufacture smartphones and tablets based on its solid patent portfolio, said FTC officials.
“MS asked us to start the settlement process for resolution. The agreement is also calling for MS not to file legal papers for a sales ban on products manufactured by Korean handset vendors and consider taking any patent infringement action against local handset manufacturers,” he said.
The FTC's decision follows a previous notice from China's Ministry of Commerce that it will approve the deal so long as it will not result in higher royalty fees for the nation's own smartphone manufacturers.
Market analysts and industry officials say the FTC's decision will help the ongoing litigation issue between Samsung Electronics and MS reach a settlement soon.
MS sued Samsung last year, alleging that it failed to pay due royalties.
Samsung claimed that MS’s acquisition of Nokia will make the merged entity a direct competitor which it said will hurt fair competition.
In addition, MS claimed that Samsung asked the FTC to change the royalties terms contractually agreed between the two parties.
“Working-level discussions are still underway between MS and Samsung Electronics to resolve the patent dispute. As the FTC conditionally approved the deal, the Samsung-MS dispute is near to settlement,” said an official who is directly involved with the issue.
Samsung paid 1 trillion won in royalties to MS last year for using Android patents.