Microsoft At Risk Of EU Antitrust Charge Over Teams Bundling With Office

Microsoft Teams Outlook 365

Unfair advantage says EU regulator, as Microsoft faces antitrust charge for bundling its Teams video app with Office suite

Microsoft is facing a potential huge antitrust fine from the European Commission, over a controversial move for its Teams communication and collaboration tool.

On Tuesday the EC announced that it had “informed Microsoft of its preliminary view that Microsoft has breached EU antitrust rules by tying its communication and collaboration product Teams to its popular productivity applications included in its suites for businesses Office 365 and Microsoft 365.”

Microsoft had actually added its Teams app to its Office 365 productivity suite in 2017 for free, to eventually replace Skype for Business.

Image credit: Unsplash

Teams bundling, unbundling

Teams rival Slack Technologies said at the time that the 2017 move took unfair advantage of Microsoft’s dominance in productivity software to crush competition.

During the Covid-19 pandemic and worldwide lockdowns in 2020 and 2021, Teams (as well as products like Zoom) gained increasing popularity due in part to its video conferencing capabilities.

In July 2020 Slack (now owned by Salesforce) submitted an official complaint against Microsoft, alleging that Redmond illegally tied Teams to its dominant productivity suite.

The European Commission in July 2023 opened an investigation into Microsoft’s bundling of Office and Teams, following the 2020 complaint by Slack.

In an effort to stave off antitrust issues, Microsoft announced in August 2023 it would begin unbundling Teams from its Office suite in Europe.

In April 2024 Microsoft confirmed the unbundling of its Teams collaboration tool from its Office suite of products in Europe and Switzerland had been completed.

Preliminary conclusion

Now this week the European Commission said it had reached a “preliminary view that Microsoft has breached EU antitrust rules” by bundling Teams to its popular productivity suites for businesses Office 365 and Microsoft 365.

Image credit: European Commission
Image credit: European Commission

It noted that suppliers of business application software, including Microsoft, are increasingly distributing this software as software as a service (‘SaaS’), i.e., software hosted on cloud infrastructure of the supplier’s choice.

The Commission said that it preliminarily finds that “Microsoft is dominant worldwide in the market for SaaS productivity applications for professional use.”

“The Commission is concerned that, since at least April 2019, Microsoft has been tying Teams with its core SaaS productivity applications, thereby restricting competition on the market for communication and collaboration products and defending its market position in productivity software and its suites-centric model from competing suppliers of individual software,” said the EU regulator.

“In particular, the Commission is concerned that Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to their SaaS productivity applications,” it said.

“This advantage may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings,” it added. “The conduct may have prevented Teams’ rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area.”

Potential fine

If confirmed, these practices would infringe Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits the abuse of a dominant market position, said the Commission.

“We are concerned that Microsoft may be giving its own communication product Teams an undue advantage over competitors, by tying it to its popular productivity suites for businesses,” said Margrethe Vestager, executive VP in charge of competition policy.

EU competition commissioner Margrethe Vestager.  European Commission
Margrethe Vestager.  European Commission

“And preserving competition for remote communication and collaboration tools is essential as it also fosters innovation on these markets,” said Vestager. “If confirmed, Microsoft’s conduct would be illegal under our competition rules. Microsoft now has the opportunity to reply to our concerns.”

It should be noted that in the early 2000s Microsoft had to pay 2.2 billion euros ($2.4 billion) in EU antitrust fines for bundling, two or more products (Internet Explorer and Windows) together and other offences.

On this latest case, Microsoft risks a fine of as much as 10 percent of its global annual turnover if it is found guilty of latest alleged antitrust breaches.