How much influence is Microsoft having on Nokia right now?

None.  Ok, very little.  Probably less that they were having before they concluded a deal for Microsoft to acquire Nokia’s device business.  Why?  It’s simple folks, anti-trust law.  With the caveat that I’m not a lawyer let me explain the bizarre situation that Microsoft and Nokia are now in.

Under U.S. (and probably other national) anti-trust law two companies that are in the process of a merger or acquisition must continue to operate under the assumption that the combination will not be approved until such time as they receive regulatory approval.  The only join activity that is allowed is planning.  So they can discuss organizational structure.  They can work on answers to all kinds of integration issues.  They can discuss what a post-merger product family might look like.  But Nokia can not change its actual plans based on the discussions with Microsoft.

This is important because of rumors that, for example, Microsoft has tried to get Nokia to cancel its rumored Lumia 2520 Windows RT tablet.  After all, Microsoft doesn’t need to have two 10″ class Windows RT 8.1 tablets in the market at the same time, which is where they will find themselves post-acquisition.  But if Nokia were to cancel the 2520, for any reason at this point, the regulatory agencies would swoop in to try to uncover any indication that this was done at the behest of Microsoft.  And if it was, then there would be hell to pay.  From delays to even denial of merger approval.  And fines.

The real perversion here is that joint activities that were ok prior to the acquisition agreement are now suspect!  Whereas Microsoft could have told partner-Nokia “hey, we’re going to deemphasize ARM for a couple of years so we think shipping the 2520 will harm your reputation” that same statement to acquisition-pending-Nokia, if Nokia took action on it, would cause regulatory hell.  Even some activities that the two were pursuing, or planning to pursue going into the launch of GDR3 or even WP8.1, might get scaled back as lawyers advise that they might now invite regulatory scrutiny.

One way to think of the current state of affairs is that the Microsoft/Nokia relationship is actually now a little less special!  Of course that will change once the regulators rule on the acquisition.

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5 Responses to How much influence is Microsoft having on Nokia right now?

  1. smallmountain says:

    The anti-trust laws need to be repealed. They were created under the false (Marxian) notion that Capitalism leads to monopolies, out of fear of the railroad monopolies, which came about because of the government’s railroad land grant program, not as a result of the free market. These laws are arbitrary, non-objective, and effectively ex post facto (you can’t really know that an action violates anti-trust laws until after you’ve committed it and a court rules). They have consistently been used over the years to punish the very best companies (Standard Oil, GE, ALCOA, Microsoft) for the crime of developing products that everybody wanted to use. The fact that two companies seeking to merge have to seek government approval is a violation of their property rights.

    That said, Microsoft does have to follow current law. And the fact that Microsoft has to remain hands off is probably why Nokia continues to make great decisions and deliver great products ;-).

    • yuhong says:

      I am not going that far, but I do wonder what if “profit margin fixing” was possible, and component suppliers could negotiate with PC manufacturers for example.

  2. AS147 says:

    No hang on guys and again it may be different in America, but if the companies pre any merger discussions had an agreement say for certain activities then that is still a valid contract entered into willingly by both parties. You don’t invalidate legally binding agreements just because you want to take the relationship further. In fact contract law is like that in most instances. Whilst you can’t dictate or influence new arrangements/agreements the originally agreed contracts are binding.

    • halberenson says:

      In theory you are correct, with the caveat that the new agreement modifies any existing agreements. And then in practice lawyers are likely to advise a much more conservative interpretation of the original contract than they would have prior to the acquisition agreement (AA). For example, the original contract may call for consultation on the development of new products. Pre-AA one party telling the other “we don’t think you should ship that”, and the other party cancelling the product, would be fine. Post-AA that same situation might receive regulatory scrutiny that could delay approval or worse. So lawyers might advise the two parties to avoid pushing changes to each others’ ongoing operations.

  3. Pingback: Microsoft and an Android play | Hal's (Im)Perfect Vision

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