EU accuses Microsoft of antitrust violations over Teams bundling

After Apple, it is now Microsoft’s turn to face the music with the DMA empowered EU regulator. The European Commission has issued a preliminary finding in its antitrust investigation into Microsoft, marking a significant development nearly a year after the inquiry began. The investigation, launched in response to a complaint from Slack, centers on allegations that Microsoft violated antitrust laws by tying its Teams communication platform to its Office 365 and Microsoft 365 business suites. Slack, now part of Salesforce, accused Microsoft of leveraging its dominant market position to unfairly promote Teams, thereby stifling competition and limiting consumer choice.

The European Union’s executive body announced that it believes Microsoft’s integration of Teams with its widely used productivity suites constituted a breach of antitrust regulations. Despite Microsoft’s decision to unbundle Teams from its Office packages for users in the European Union and Switzerland in October, the European Commission has deemed these measures insufficient. The Commission’s Statement of Objections highlights that Microsoft’s practices potentially granted Teams a significant distribution advantage by not offering customers the choice to acquire or reject Teams when subscribing to their SaaS productivity applications.

Moreover, the Commission expressed concerns about the interoperability limitations between Teams and competing products. These limitations could have exacerbated the competitive disadvantage for rival communication and collaboration tools, effectively preventing them from competing and innovating on an equal footing. The preliminary findings suggest that such practices may have harmed competition, to the detriment of customers in the European Economic Area (EEA). “The Commission 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,” the EC noted in an official statement.

If the European Commission’s preliminary findings are confirmed, Microsoft could face severe penalties, including a fine of up to 10% of its annual worldwide turnover. Given Microsoft’s substantial global revenue, this fine could amount to billions of dollars. Additionally, the Commission may impose remedies designed to restore competitive conditions in the market, potentially requiring Microsoft to implement more significant changes to its business practices.

This investigation marks the first time in 15 years that Microsoft has faced antitrust charges in the EU. Historically, Microsoft has encountered similar regulatory challenges, notably involving the bundling of Windows Media Player and Internet Explorer. In these past instances, Microsoft was required to offer alternative versions of its software to comply with EU competition laws and faced significant fines for non-compliance. This case against Microsoft aligns with the EU’s growing assertiveness in regulating Big Tech companies. As mentioned earlier, the EU recently levied similar charges against Apple for its app store practices, which fall under the purview of the newly implemented Digital Markets Act. For those who are unaware, the EU is actively seeking to ensure fair competition within the digital landscape and prevent established tech giants from leveraging their market dominance to stifle innovation from smaller players.

In light of the preliminary findings, Microsoft has expressed a willingness to cooperate with the European Commission. Brad Smith, Vice Chair and President of Microsoft, stated, “Having unbundled Teams and taken initial interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the Commission’s remaining concerns.”