final assignment gregor hohls group 2

8/2/2019 Final Assignment Gregor Hohls Group 2

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Google,Inc.&MotorolaMobilityHoldings,Inc.

ANon-HorizontalMerger&AcquisitionCase

MaastrichtUniversity

SchoolofBusinessandEconomics

Maastricht,04April2012Name:GregorHohls

ID:i6001867

Study:InternationalBusinessEconomics

Course:InternationalCompetitionPolicy

CourseCode:EBC2093

GroupNumber:02

TutorName:G.Valletta

WritingAssignment:FinalCaseStudy


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TableofContents

1.Introduction...................................................................................................................1

2.TheCase........................................................................................................................1

2.1Google,Inc...........................................................................................................................2

2.2MotorolaMobilityHoldings,Inc...........................................................................................2

2.3ReasonsforaMerger...........................................................................................................2

2.4TheEUDecision....................................................................................................................3

2.5TheUSDecision....................................................................................................................4

2.6IntermediateSummary........................................................................................................5

3.EconomicAnalysis..........................................................................................................53.1AntitrustGuideline...............................................................................................................5

3.1.1ProductMarketDefinition...................................................................................................6

3.1.2ForeclosureorHarmonConsumers....................................................................................9

3.1.3EfficiencyGains..................................................................................................................10

3.1.4Results................................................................................................................................11

3.2OutlookandOtherIssues...................................................................................................11

4.Conclusions..................................................................................................................12

Bibliography....................................................................................................................13


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1.Introduction

OnAugust15th in2011,Google, Inc.announcesthatit hasagreedonacquiringMotorola

Mobility, Inc.bymeansofsharepurchase.This$12.5billiondealisGooglesfirststep intothemobiledevicehardwaremarketandcanthereforebeseenasanon-horizontalorvertical

merger, asGoogle has beenactive in themarket at adifferent stageof the supply chain

through the development of one of the major mobile device operating systems (OSs):

AndroidOS.Thismergerwill strengthenGooglesstancein themarket formobiledevices

andwillmainlyboostGooglespatentportfolio.Nearlyonethirdofallmobiledevicesalesin

2011 were smartphones with a growth rate of 58 percent from 2010. In this rapidly

developingmarketwith suchahighnumber ofconsumers, it isofgreat importance that

thereis highcompetition inorder tokeep theprices lowand todrive innovation.Asthis

marketisalsoveryglobal,antitrustorganisationsallovertheworld,forexampletheUnited

StatesDepartmentofJusticeortheEuropeanCommissionneedtocheck,whetheramerger

liketheonethatispresentedin thefollowingcouldharmcompetitionorincreasea firms

marketpowerinamarketaboveanacceptablelevel.Additionally,thispaperwillfacethequestion,whetherthesinergiesofthismergerarebigenoughtoinfluencethecompetition

commissionsdecisions.

Inordertoanswerthesequestions,thispaperwillfirstlypresentthecaseandthedecisionsfromboththeEuropeanandtheUSpointofview.Secondly,itwillshowananalysisofthe

economicbackgroundofthecasetotracethestepsofthetwoantitrustcommissionsandthen,thirdlyit will concludewitha competitionanalysisandasearchforefficiencygains

thatjustifythecommissionsdecisions,followedbyashortoutlook.

2.TheCase

Asanintroductoryparttothispaper,Iwillgivesomegeneralinformationaboutthefirms,

theiroperationspriortothemergerandaprojection oftheir combinedfuture.Iwillalsopresent the notifying partys (i.e. Googles) reasons for why they would like to acquireMotorola. Following this are the EU and U.S. decisions and a short abstract on the

differencesintheirapproaches.


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2.1Google,Inc.

Googleismainlyknownasaproviderofitsinternetsearchplatformandonlineadvertising

services. Foundedby Larry Page and Sergey Brin in 1998, it became a publically traded

company in2004 and since then ithas become one of the biggestplayers inweb-basedenterprisesaroundtheworld.Itsbroadrangeofproductsgoesfromwebsearchtools,via

advertising services like AdSense or AdWords, communication and publishing services,

developmentresources,map -relatedproducts,statisticaltoolsanddesktopapplicationsto

mobileapplicationsand theoperatingsystemsAndroidformobiledevicesandChromeOS

forpersonalcomputers.(Google,Inc.,2012 a)

2.2MotorolaMobilityHoldings,Inc.MMI, formerly the mobile devices division of Motorola Inc., became its own publically

traded company in January2011. In the 1990s itwas the pioneerof the flipphone, the

StarTac.Withthisandthroughitsfocusonthismarketsegmentitwasabletodevelopitshitproduct,thesuper-thinflipphone:MotorolaRAZR.Whiletheseboosteditspositioninthe

analoguemobilephonemarketforawhile,MMIsslowadaptiontodigitaltechnologymade

itlosetheracetoitsrivals,e.g.SonyEricssonorNokia,inthebeginningofthe21stcentury

(MotorolaMobilityHoldings,Inc.,2010).Itsmarketsharebegantodropwitharecord$1.2

billion loss in2007 and continued todrop inthe years thereaftertowards2.7 percentin

2010.This,amongstotherissues,hasledsomepeopletobelievethatMotorolawasnearing

bankruptcy.(Gartner,Inc.,2011)

2.3ReasonsforaMerger

Initsownpressrelease,GoogleInc.(2012)statesthemainbenefitsofthedealtobe:

1. An acceleration of innovation and choice in mobile computing through whichconsumerswillgetbetterphonesatlowerpri cesand

2. Aprotectionof theAndroidEcosystemthroughMotorolaspatentportfolio,whichguaranteesAndroidtostayopen-sourcesoftware,whichisvitaltocompletioninthemobile device space, as it is ensuring hardware manufacturers, applicationdevelopers,mobilephonecarriersandconsumersalltohavechoice.

Since 2008 Motorola has fully implemented the Android operating system for their


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smartphones, which creates a natural fit between [the two] companies (Google, Inc.,

2012b,p.1).This,aswellasMotorolabeingamemberoftheOpenHandsetAlliance(OHA),

aconsortiumtocreateopenstandardsformobiledevices,whichnowincludes84firmsfrom

every part of the supply chain, will enable faster innovation.Another point that Google

stresses in their facts about the acquisition is the long history of innovation in

communications technology at Motorola Mobility and additionally the development of

intellectualproperty.ThelatterisveryimportanttoGoogleasitwillsupporttheirown,so

farverysmall,patentportfoliotodefendAndroidOSagainstthestrongcompetitionfromAppleandMicrosoft,whichiswellexplainedinanextraparagraphintheirpressrelease.Itis

very important to Google to support the constant competition it has injected into the

smartphonemarket since the introduction of the first Android phone in 2008. They are

trying to give consumers, application developers, and mobile carriers high-qualityalternatives toproducts likeApples iPhoneand iPadandRIMsBlackBerry(Google, Inc.,

2012b,p.2).Googleespeciallyhighlightswhattheywillnotbetryingtodowiththemerger,

inordertokeepcompetitorsandconsumerscalm.TheydonotwanttoclosetheAndroid

ecosystemandfavourMotorolaoverotherhardwaremanufactur es.TheAndroidOSwillstay

availabletoeveryoneonanopensourcebasis.Googlewillalsonotforcetheirpartnersto

useGooglesearch(inordertoboosttheirownadvertisingrevenues).

2.4TheEUDecisionTheEuropeanCommission(EC)wasnotifiedoftheproposedmergerinlateNovember2011.

SinceGoogle andMotorolaMobility havea combinedworld-wideturnoverexceeding 5

billionandeachhaveanEU-wideturnoverofmorethan250million,aswellasneitherone

company isachievingmore than two-thirdsof itsEU-wideturnoverwithin oneEuropean

country,themergerhasanEUdimensionandhasthereforetobeallowedbytheEC.Intheir

analysisofwhetherthemergerwouldbringaboutcompetitionissues,theECconcludedto

focus on the vertical relationships between Google as the supplier of the open source

AndroidOSand online serviceson the one handandMotorolaMobility asa supplier of

mobiledevicesandholderofimportantIntellectualPropertyRightsformobiledeviceson

theotherhand(EuropeanCommission,2012,p.4).TheECsplitsitsinitialmarketanalysis

intothreeparts:Firstlyitfocussesonthemarketforoperatingsystems,secondlyitanalyses

themarketformobiledevicesandthirdlyitdiscussestheStandardEssentialPatents (SEPs)


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GoogleacquiresfromMMI.Withtheirmarketanalysistheyconductacompetitionanalysis

andconcludeinallareasthatthemergerdoesnotraiseanycompetitionissues,whichcan

alsobeseenintheeconomicanalysisthatfollowslater.Theirdecisionthereforeistodrop

theinvestigationandallowthedealtogothroughwithoutanyremediesorchangestobe

made.

2.5TheUSDecision

The United States Department of Justice (DOJ) has approached the case in a similar,

however, slightly different way. It combined the investigations of the merger case withacquisitionsofcertainpatentsbyAppleInc.,MicrosoftCorporationandResearchInMotion

Ltd.,asallofthesewerelinkedtoeachother.Intheiranalysis,theDOJfollowedasimilar

approachtotheEU,checking,whether theproposedacquisitionswould create incentives

and abilities for the acquiring firms to exploit ambiguities in the SSOs F/RAND [fair/reasonable and non-discriminatory terms] licensing commitments to hold up rivals, this

preventingorinhibiting innovationandcompetition (U.S.DepartmentofJustice,2012,p.

2). In terms ofMicrosoft Corp.s and Apples acquisition ofNortel patents, the divisions

concernswerelessenedbytheclearcommitmentsbyAppleAndMicrosofttolicenseSEPs

(U.S.DepartmentofJustice,2012,p.1)onFRANDterms,aswellastheircommitmentsnot

toseekinjunctionsindisputesinvolvingSEPs.However,theDepartmentofJusticeidentifies

Googlescommitmentstobelessclear.TheDepartmentreferstoGooglesopenlettertoall

StandardSettingOrganizations(SSOs)andarguesthatGooglesstatementdoesnotdirectly

providethesameassurance,asforexampletheothercompaniesmentionedbefore.Google

forexamplementionsintheirletterthatitw illnotseekinjunctionsfortheinfringementof

SEPsagainstacompetitor,howeveronlyfordisputesinvolvingfuturelicenserevenues,and

only if the counterparty forgoes certain defensessuch aschallengingthe validity of the

patent;paysthefulldisputedamountintoescrow;andagreestoareciprocalassuranceas

the other companies statements concerning the exercise of its newly acquired patent

rights(Lo,2012,p.3).Theseare,however,onlyreasonsfortheDepartmenttodecideon

further monitoring of how competitors are exercising their patents, in order to identify

potentialmisusesoftheSEPsandnottoprohibitthemerger.Itthereforeconcludestoallow

all three transactions and highlights that each of them incurs a complex intersection ofintellectualpropertyrightansantitrustlaw(U.S.DepartmentofJustice,2012,p.5),which


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needtobebalancedoutcorrectly.

2.6IntermediateSummaryAfterintroducingthecompaniesandtheirpersonalreasonsforamerger,Ihavepresentedtheantitrustcommissionsdecisionsandtheirgeneralviewoftheproposedtransaction.I

didthisinordertogiveabasicoverviewofthecasesurroundingsforabetterunderstanding

ofthenowfollowingeconomicanalysisofthecase,whichwillbebasedonanownantitrust

guideline, supported by data from the companies themselves and the EU commissions

detailedanalysisofthemarkets.

3.EconomicAnalysisFollowingtheprecedingdescriptionof thecaseisadetailedanalysisofthemarketforthe

proposed transaction aswell asa competition analysis to identify and explainthe riskof

anti-competitive behaviour post-merger. I will also present the potential benefits for

consumersthatmayresultbecauseofthistransaction.Iwillbeginbyexplainingthemethod

ofanalysis:myantitrustguideline.

3.1AntitrustGuideline

Inaverticalmergercaseit is important tofollowcertainsteps inthe analysisto identify

whetheramergercouldbeharmfulforconsumersornot.Inhisbookaboutcompetition

policies, MassimoMotto (2004, p. 377) concludes his chapter on vertical restraints andverticalmergersbysaying:aperseprohibitionrule[forverticalmergers]wouldclearlybe

inappropriate,sinceitwouldforegoefficiencyeffectswhicharelikelytodominateinmost

cases.Theseefficiencygainsaretobefoundthroughtheanalysisbelow,inordertojustify

thecompetitionpolicymakersdecisions.ThefollowingFigure1showsthestepsofsuchan

analysis.Afirststepineveryantitrustinvestigationis thedefinitionoftherelevantmarket.Throughananalysisofthepre-andpost-transactionmarketsharestheanalystendsupwithaverdictondominance.Ifthemergedentitywillnotbedominant,nofurtherinvestigation

isnecessary,althoughthetransactionmightstillbequestionable.Ifdominanceresultsfromthetransaction,itneedstobeassessed,whetherthereisthepossibilityofforeclosureand

potential harm on consumers. If this is the case then we need to see, if the before-


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mentionedefficiencygainsoutweighthelossesonconsumerwelfareandforeclosureofthe

market.

Figure1:AntitrustGuideline

3.1.1ProductMarketDefinitionWithregards tothedefinitionoftherelevantproductmarkets, theEuropeanCommission

has split up the analysis three-fold. First, it analyses the relevant market for operatingsystems:themarketGoogle isactive in.Operating systemsare system software products

thataredesignedtosupportthefunctioningofthemobiledeviceandthecorresponding

applications(EuropeanCommission,2012,p.5).GooglesOS,Android,isfreetouse,edit,

andfurtherdevelopunderanopensourcelicence.GooglestatesthatMotorolaisnotactive

inthismarket,aswellasproposestoexpandthemarketformobilesoftwareplatformsfor

smartphonesto includemobile softwareplatformsfortablets,as theyarevery similar to

each other (arguingthat for exampleApples iOS is running onboth the iPhone and the

iPad).Additionally,GoogleseesAndroidasadirectsubstitutetoothersoftwareplatforms

suchasiOS(Apple)orBlackBerryOS(ResearchinMotion),whicharenotavailableforthird-

party Original Equipment Manufacturers (OEMs): From a demand side perspective [...]

userscansubstitutebetweendevicesusing licensableandnon-licensablemobilesoftwareplatforms(European Commission, 2012, p.5) and on the supply-side, OEMs can switch

betweenmobile operating systems or start producing their own. In the view of the EU

Product

MarketDefinion

Dominant

IsthereForeclosure?

WillithurtConsumers?

ArethereEfficiency

Gains?

Decision

NotDominant

NofurtherInvesgaon-

althoughquesonable


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Commission(2012),whichisinlinewithGooglesp roposal,itcanbeconcludedthat:

1. MobileOSsaredifferentfromPCOSs2. MobileOSsforsmartphonesaredifferentfrombasicmobilephones 3. MobileOSsforsmartphonesandtabletsarepartofthesamemarket.

Figure2showsthepercentageofeachoperatingsystemsmarketshareforeveryquarterin2010and2011.ThetrendlinesIhaveaddedclearlyshowtheconstantincreaseofAndroid

OSs usage in those two years, whereas the Symbian operating system faces a strong

decrease.Apples iOSmarketshare is increasingatamuch slower rate,whichisprobablyduetothefactthatAndroidisavailableforalotmoremobiledevices.

Figure2:MobileOSMarketShares%2010and2011byquarter(Gartner,Inc.,2011)

The market for mobile devices, the Comissions second analysis part, is much easier to

identify, as decisions from earlier EU Antitrust cases can be adopted. The commission

decidesthatitseparatesthesmartphonemarketfromthemarketforothermobiledevices

(basic and feature phones) as the difference in functionalities and distribution channelsmajorlyaffectstheconsumerschoice.Figure3onthenextpageshowsthemarketsharesofthesmartphonemanufacturersforthefinalquartersof2010and2011.AppleandSamsung

arethetwobigwinnersintheyear2011,whereasNokiasmarketsharedropsbyalmostahalf.MotorolaMobilitysmarketshareisnegligiblea ndgetslostaspartofothers.

ThemarketforStandardEssentialPatentsisverycomplexandthereforehardtogeneralise.

Google,Inc.willacquireabout7000to8000patents,ofwhich60007000areUSand500

0,00

10,00

20,00

30,00

40,00

50,00

60,00

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

Android

iOS

Symbian

RIM

Microsoft

Bada

Other

Linear(Android)

Linear(iOS)

Linear(Symbian)


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Figure3:MarketSharesofSmartphoneManufacturers(Gartner,Inc.,2011)

1000 are EU patents. Motorola Mobilitys patent portfolio focuses mainly on wireless

communicationhardwareandtosomeextenthigh-definitiontelevision(HDTV)(European

Commission,2012,p.2).ThisquoteshowsthatthepatentsGooglewillacquirearepartof

manydifferentproductmarketsandthereforethecommissiondefinesthateachSEPcanbe

consideredasaseparatemarketinitselfasitisnecessarytocomplywithastandardand

thuscannotbedesignedaround(EuropeanCommission,2012,p.12),meaningthatthere

arenoperfectsubstitutesormanyalternativesforeachpatent.

In terms of geographical boundaries the markets are said to be at least covering the

EuropeanEconomicArea,iftheycannotevenbeconsideredworldwideandthereforevery

largeinsize.

Theproductmarketanalysisshowsfirstly,thatalthoughAndroidOSisbyfartheleaderin

themobileOSmarketitdoesnotchangeitspositionthroughtheacquisitionofMotorola

Mobility,Inc.,;thesuccessofAndroidisfullydependentonthesmartphonemanufacturers

decision tochoose itas theirOS. Therefore, secondly,wenotice thatMotorolasmarket

shareinthemarketformobiledevicesisnegligiblylowandwillnotcreateanydominant

positioninthatmarket.Thirdly,GooglestatesopenlythatitwillnotbefavouringMotorola

handsetsandwecanseethatifitwoulddoso,Androidsmarketshareandthereforealotof

advertisingrevenueswouldbelost.Lastly,becauseeverySEPisseenasaseparatemarket

0

5

10

15

20

25

30

2010Q4 2011Q4

Apple

Samsung

Nokia

ResearchinMotion

HTC

Others


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andGoogleiscommittingopenlytolicenseallacquiredpatentsunderFRANDterms,there

arenoconcernsforcompetitionraised hereaswell.3.1.2ForeclosureorHarmonConsumersAlthoughtheprecedinganalysishasshownthatthereisnodominantpositionpost-merger,

meaning that no further investigation is necessary, I will continue with a competition

analysistoseepossibleeffects of foreclosure orharmonconsumers.Thiswill leadusto

possibleefficiencygainsthatresultfromthemerger.Foreclosureisthebehaviourofafirm

toengage inmanydifferentpracticesaimedatdeterringentrants(Motta,2004,p.88).

These include, amongst others: investing in extra capacity, setting prices below cost,

flooding a market wth many different product specifications, [...], bundling, price

discriminating(Motta,2004,p.88).Theseactivitiescaneventuallyforcecompetitorsoutof

amarketandwillkeeppossiblecompetitorsfromentering.Asmentionedearlier,it isvery

important to keep the market for mobile devices highly competitive as it affects an

incredibleamountofconsumers.SubsequenttothemergerGooglewillhaveaccess toall

threekeyelementsthatareneededforamobiledevicetowork:(i)technologythatallows

thedevicetooperateovermobilenetworks;(ii)amobileOS;and(iii)theremainingdevice

hardware(EuropeanCommission,2012,p.12).Thefirstit willgetthroughtheacquisitionof patents, the second Google already posesses and the third comes from Motorola.

Thereforetherearetwoverticalrelationshipsthatarecreatedbetweenthosethreepoints:

the OS as a key ingredient into smartphones and the Standard Essential Patents as key

ingredients into the smartphone industry. Next to these, themerger also presents some

conglomeraterelationshipin theconnectionbetweensmartphonesontheonehand and

Googlesonlineservicesontheotherhand.Ananalysisoftheverticalrelationshipdelivers

thefollowingresults.AlthoughGooglestatesthatitdoesnotcontrolAndroidandtherefore

Androidsmarketshare[]shouldnotbeattributedtoGooglebuttoeachofthevarious

OEMs building Android based phones (European Cmmission, 2012, p.13), the

manufacturersstatesomethingdifferent.SinceGoogleisresponsibleforeachnewrelease

oftheAndroidOSandhastoapproveeachtabletorsmartphonethatwantstorunit,the

CommissionfindsthatallmarketshareshouldbeattributedtoGoogleontheOSlevel.With

this significant market share, Google would have enough power to exert some of the

practicesmentionedbefore.Throughchoosingaleadmanufacturerforeachnewversionof


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theAndroidOS,itcouldsignificantlyimpedecompetitionespeciallybyfavouringMotorola

irrespectiveofitsperformance.GooglecouldalsodowngradeversionsofAndroiditoffersto

other OEMs than Motorola and therefore make their own handsets more attractive.Although the possibilities are great for Google to use these methods to foreclose themarket,therevenuelossforGooglefromrestrictingaccesstoAndroidismorelikelytobe

far greater than the potential gain from Motorola Mobility smart mobile device sales

(EuropeanCommission,2012,p.16).Thisisthemainreasonwhyitwillbeverylikelythat

Googlewilltry toensurethatAndroidisdistributedaswidelyaspossibleamongstseveral

OEMsandthatitwillnotclosethemarket,tryingtoboostonlytheMotorolasmartphone

sales.

Thetopicofforeclosuredoesnotseemtobeanissueinthiscase.Thequestionremains,

whetherthetransactionwillhurtconsumersornot.ThoseusingMotorolasmartphonesup

until know will not be harmed by the transaction as Motorola Mobility is already using

Android as the exclusive operating system for its smartphones. Other consumers using

AndroidonothermanufacturersdevicesmightonlybenefitfromGooglehavingtheirown

in-househardwareproduction,becausethecreation ofnewAndroidversionsmightimprove

throughthecooperationofsoftwareandhardwaredevelopment.

3.1.3EfficiencyGainsThe large amount of patents Google buys from Motorola will bring some stronger

competition to the smartphone market. As a lot of the patents are essential to everyproducer of smartphones, theywill need to license them fromGoogle from now on.Ofcourse, theywill be facedwith the same terms and conditions asbeforewithMotorola,

however the power in Googles hands can bring about some difficulties for Apple or

Samsung for example. HTC Corp., the second-biggest Asian smartphone producer for

examplehasboughtnine patents fromGoogle thatwerepart of theMotoroladeal,with

whichit isnowabletodefenditselfagainstalawsuitby Apple.ApplewassuingHTCforcopyingcertainfeaturesoftheiPhone.GoogleknowsthatHTCisundertremendouslegal

pressurefromAppleandclearlyonthelosingtrack(Milford&Decker,2011,p.1).Byselling

thepatentstoHTC,GoogleisclearlysupportingoneofitsmajorOEMstobeabletostickup

againstoneofitsmajorcompetitors.BystrengtheningitsOEMs,Googlecanfurtherexpand


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itsAndroidecosystemandcreateapowerfulcounterparttoitscompetitors.AsDavidBalto,

senior fellow at the Center for American Progress and a former antitrust official at the

FederalTradeComissionsays:Ifanything,antitrustregulatorsmayseethedealasaboost

tocompetition.AndroidissuchacrucialcompetitortotheiPhoneinparticular,thatallowing

GoogletobuyMotorolaMobilitywilllikelyproduceevenmoreinnovationinsmartphones

andotherdevices (Tessler,2011,p.1).3.1.4ResultsTheeconomicanalysisofthismergerhasshownthatintermsofproductmarketdefinition

there are no issues of dominance.WhereasAndroidmight be seen as dominant in themarketforoperatingsystemstherewillbenointentionsforGoogletoforecloseanypartof

themarketfornewentrants.Googlewillalsonotbeabletoforceanycompetitorsoutofthe

market by favouring solely Motorola smartphones, because of its small market share.

Additionally,therearesomeefficiencygainsthroughtheacquistionofpatentsintermsof

creating strong competition against Apple. Yves Maitre, senior vice president of France

TelecomOrangegivesthedealhisblessingbysaying: Ibelieveitisalwaysgoodtohavevery

strong players and very integrated ones.We welcome strong competitors to Apple, and

MotorolaandGooglewillbethistypeofverystrongcompetitor(Fried,2011,p.2).3.2OutlookandOtherIssues

AninterestingissuetohaveashortlookatiswhereGooglewillgofromhere.Asmentioned

earlierithasalreadyusedthepurchasedpatentstosupportHTCinfightingoneofApple

Inc.slawsuits.ThroughthetransactionGooglegainsthepowertopulloffsomemoremoveslikethis.ThepatentportfolioalsooffersGoogletheopportunitytogetfurtherinvolvedin

themediamarketasitincludespatentsforhighdefinitiontelevision,asmentionedinthe

beginning.ThesewillprovidethebasisforthedevelopmentofTVset -topboxesandother

home entertainment devices; another sector in which there will be more competition

(Higginbotham&Fehrenbacher,2011).TimWorstall(2011),authorforTheRegister,claimsthatthereismuchmoretothedealthanpatentsandcompetitionissues.Heraisestheissue

thattogetherwiththecompany,itsequity,employees,etc.,Googlehasalsoboughtaseries

oftaxlosses,whichwillreducethecostofbuyingMotorolaMobiltyfr om$12.5billionto

$3.8billion.This isdue to the factthat MotorlaMobility hasbeen losing ashed-loadof


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cashinrecentyears.Ithaslotsof[]taxlosses,whichcannowbeoffsetagainstGoogles

futureprofits(Worstall,2011,p.2).Googlewillbetaxedoncumulativeprofitsoveralongerperiodoftimeandbringingin theselosseswill reducetheamountofmoneyGooglewill

havetopaytaxeson. Thetaxbenefitsofthedealmakewhatwa sagooddealintoagreat

deal (Browning&Byrnes,2011,p.1)saidRobertWillens,a NewYorkaccountingand taxexpert.

4.ConclusionsAgreatdealthatisthegeneralperceptionofthisacquisitioncase.Theprecedinganalysishasconfirmedthepublicviewofthismergerasithasfirstpresentedthetwocompaniesand

the reasons why Google would like to acquire Motorola. The short description of the

EuropeanCommssionsaswellasoftheUnitedStatesDepartmentofJusticesdecisionhave

presentedthelegalbackgroundtothecase.Thefollowingeconomicanalysisgaveanswerto

the questions stated in the introduction: The merged entity will not be able or more

preciselyitwillnotbewillingtoforecloseanyofthemarketsitisactivein.Thiswouldonly

harm its own operations and profits and it will have great influences on customer

satisfaction. The efficiency gains analysed afterwards show thatGoogle will create even

more competition subseding the transaction, rather than destroy it. Furthermore, the

acquired patents will stabilise Googles position as a competitor to Apple Inc. and other

companieswith great market shares. In conclusion, I can only agreewith the European

Commission andtheUSDepartmentof Justiceinsayingthat thisacquisitionofMotorola

Mobility, Inc. byGoogle, Inc. should notbeprohibited, as itwill create a strongmarket

playerthatisnotdominantandwillthereforeincreaseinnovationintheindustry.


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final assignment gregor hohls group 2

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