Microsoft’s acquisition of Nuance gets cleared by EU without condition

According to news reports, the proposed purchase of Nuance Communications, Inc. (‘Nuance’) for $19.7 billion by Microsoft Corporation (‘Microsoft’) has been authorized unconditionally by the European Commission under the EU Merger Regulation. In the European Economic Area (‘EEA’), the Commission found that the deal would not cause any competition concerns as it had earlier feared. 

Nuance specializes in speech recognition and artificial intelligence (AI). The company’s Dragon voice recognition software is certainly recognized by the general public. It claims to have also contributed to the development of Apple’s digital assistant Siri. Nuance’s speech technology is widely employed in the medical field. According to Nuance, 77% of hospitals in the United States employ their technology.

While the EU has given the Microsoft-Nuance deal a go-ahead, the Competition and Markets Authority in the United Kingdom has just launched its preliminary probe, implying that regional scrutiny will continue.

The EU, however, investigated horizontal overlaps in the transcribing software marketplaces between Nuance and Microsoft, concluding that the two companies offer substantially different solutions. “Microsoft and Nuance offer very distinct services”, according to the Commission. While “Nuance primarily provides end-users with out-of-the-box solutions, Microsoft’s Azure Cognitive Services includes application programming interfaces (‘APIs’) that developers can utilize to integrate voice recognition technology into their programs” it further added.

Furthermore, the Commission believes that the combined business will face significant competition from other parties. Other players would continue to pose “strong” competition to the merged entity, according to the report.

The EU looked into the vertical link between Microsoft’s cloud computing services and Nuance’s downstream transcription software for healthcare as well but discovered that competitive transcription service providers do not use Microsoft’s cloud computing services. The Commission’s market examination revealed that competitive healthcare transcription service providers do not rely on Microsoft for cloud computing services and healthcare transcription service providers are not particularly heavy users of cloud computing services. The collection of connections between Nuance’s transcription software and several Microsoft applications.  In the markets for (healthcare) transcription software, enterprise communication services, customer relationship management software, productivity software, and PC operating systems, the combined entity would not have the ability or incentive to foreclose its competitors, according to the Commission.

Moreso, In the markets for (healthcare) transcription software, enterprise communication services, customer relationship management software, productivity software, and PC operating systems, the EU ruled that the combined business would not have the power or desire to foreclose its competitors. In any case, Windows is now the only PC operating system that Nuance’s transcription software is compatible with.

Nuance can only use this data to perform its services, according to the Commission and due to contractual limits and data protection legislation, it is not utilized by any other firm and cannot be used for any other reason. Furthermore, having access to such data does not give Microsoft a competitive advantage over competing healthcare software providers, because important transcribed information is typically stored in third-party applications such as electronic health record systems, which combine data from multiple sources, rather than Nuance’s fragmented speech data.

As a result, the Commission determined that the proposed acquisition would not cause any competition issues on any of the EEA markets assessed, and the case was cleared unconditionally. Recall that the UK’s anti-trust authority said earlier this month that it would investigate the proposed merger to see if there were any reasons to be concerned.

The Competition and Markets Authority (CMA) stated in a statement that it is “considering whether it is or may be the case that if this transaction is carried out, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for good reason.”

Microsoft announced the acquisition of Nuance in April, stating that it was doing so to strengthen its position in the healthcare vertical, where Nuance has several clinician-support products (such as tech for documenting telehealth visits; a speech recognition tool for clinical documentation; and AI-powered radiology reporting, among other software tools).

Nonetheless, due to existing “contractual limitations” and regional data protection legislation, the European union’s evaluation of the data side of the Microsoft-Nuance deal awarded it a clean bill of health.

While this analysis is primarily focused on the competition, it’s worth noting that data protection received a mention in an EU antitrust review. (The earlier case concerns the EU’s [ongoing] investigation of Google’s adtech, which came after the Commission approved Google’s acquisition of Fitbit last year, but with terms that included restrictions on Google’s use of Fitbit health data for advertising.)

The EU notes in a press release about Microsoft clearance, Nuance’s “The Commission found that Nuance can use this data only to perform its services.” “It is not utilized by any other company and, due to contractual limits and data protection legislation, it cannot be used for any other reason.”

Since “important transcribed information is typically stored in third-party applications like electronic health record (EHR) systems that combine data from several sources, as opposed to Nuance’s fragmented speech data,” the EU’s antitrust division concluded that access to Nuance’s data will not give Microsoft an advantage that would allow it to shut out competing healthcare software providers.