Microsoft, LinkedIn near critical Brussels milestone

4th November 2016. By Dafydd Nelson & Flavia Fortes

Microsoft is approaching a critical moment in its plan to acquire LinkedIn — the moment when EU case handlers must explain whether they have important concerns about the $26.2 billion deal.

The buyout of the professional social network has come under fire from some quarters, with Salesforce.com voicing the most outspoken opposition.

Salesforce, which makes software focused on customer relationship management, has complained that the buyout would give Microsoft control over valuable data about the habits of the social network’s 450 million plus users.

But as Microsoft waits to hear whether the European Commission agrees with that theory, a recent ruling by Brazil’s competition watchdog suggests that some data-related concerns about the takeover — though perhaps not all — may have been overstated.

The Administrative Council for Economic Defense, or CADE, cleared the deal on Sept. 21 — without conditions and within 30 days under a fast-track procedure.

CADE considered many aspects of the data that Microsoft would obtain by purchasing LinkedIn. But it didn’t look at one critical factor: LinkedIn’s “interactivity data” — information that the social network doesn’t make available today. These metadata show not who is linked to whom, but which LinkedIn users are actually communicating with each other, month by month.

One reason CADE didn’t consider this dataset could be that rivals didn’t raise it as a concern during the sped-up review in Brasilia. If that was the case, the EU’s phase I assessment could pose a greater risk to the Microsoft-LinkedIn deal.

The Brazilian authority did consider the relevance of LinkedIn’s Sales Navigator — a tool that helps salespeople identify leads — for Microsoft software specialized in customer relationship management, or CRM.

Sales Navigator can be used in conjunction with CRM software to harvest information about potential customers from LinkedIn data. But CADE concluded that Sales Navigator wasn’t an essential input for CRM software.

Although the agency founds a clear link between Microsoft’s CRM software and Sales Navigator, it concluded that this relationship was unlikely to harm competition, given Microsoft’s low market share in Brazil’s CRM market.

The Brazilian regulator said that large companies and CRM industry leaders, including SAP and Oracle, don’t use Sales Navigator.

Microsoft and LinkedIn didn’t disclose Microsoft’s CRM market share in Brazil. But they did identify Salesforce as the global leader, with 19.7 percent, followed by SAP with 10.2 percent, Oracle with 7.8 percent, Microsoft with 4.3 percent and Adobe with 3.5 percent.

CADE also concluded that the LinkedIn tool seemed to be “complementary” to CRM software, rather than an essential input.

In addition to the CRM issue, the Brazilian regulator looked at the market for online advertising but didn’t reach any definitive findings because of Microsoft and LinkedIn’s low market shares. It also discarded possible issues concerning recruiting and social network services.

But the investigation into the deal is still under way at the European Commission in Brussels, where Microsoft should know within days where it stands.

If the EU regulator does have preliminary misgivings, it will invite the merging companies to a “state of play” meeting. Under EU guidelines, that gathering — if called — would take place by no later than next Tuesday, Nov. 8.

If the commission doesn’t call a meeting to express concerns, the transaction can be expected to be cleared unconditionally.

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