EU: ContentGuard Deal Can Go Through

As EU regulators abandoned their investigation into the acquisition, Microsoft, Time Warner and Thomson Media quickly sealed the deal to acquire digital rights technology vendor ContentGuard. But ContentGuard CEO Michael Miron charges they’ve plundered the company.

The European Commission said on Tuesday that the proposed acquisition of ContentGuard by the three companies doesn’t fall under the EU’s Merger Regulation, and they were free to complete the deal.

EU antitrust regulators launched an investigation in August 2004, after Microsoft and Time Warner notified them of their plan to take over the company. The two already owned a majority share and wanted to buy out the remaining shares from Xerox , which has originally spun off the DRM technology. Under the terms of the deal, Microsoft and Time Warner each would own 48 percent of ContentGuard.

The EU didn’t want Microsoft to block rivals from accessing ContentGuard’s technology. The commission already had ruled Microsoft used its PC operating system monopoly to shut out competing media players. It saw ContentGuard’s DRM technology as another potential tool for forcing out rivals.

Microsoft and Time Warner countered by adding Thomson to the deal. Thomson is a French provider of business information and technology. Because the new arrangement would give the three companies each a 33 percent stake in ContentGuard, none of them would be able to shape its technology to the detriment of Microsoft’s competitors, the EU decided.

But ContentGuard CEO Michael Miron sued Microsoft and Time Warner, saying that the two ” enrich themselves at the expense of the company and its employee shareholders.” The suit, filed on March 9, alleges that Microsoft and Time Warner had given themselves licenses to ContentGuard’s technology for peanuts.

Miron filed the suit on behalf of a class of employee stockholders, after the triumvirate offered to buy out employees’ stock at $2.098 per share. Miron said the cheap price reflects the lowering of the company’s value by its owners’ “self-dealing conduct.”