The decision was hailed by the European Commission, which said the ruling "confirms the Commissions assessment of new markets and technologies under the EU MergerRegulation."
"The Commission's decision to clear the transaction did not put the development of innovative products and services at risk," the Commission said in a statement.
Skype controls a high percentage of the market for Internet communication that combines audio and visual capabilities – 80 percent to 90 percent – the commission said.
"Microsoft/Skype's high combined market share of 80 percent to 90 percent was not indicative of market power given the particular characteristics of the market in question, which is marked by short innovation cycles and products which are free," the Commission said.
Cisco produces products for video conferencing that also combine video and audio communications.