Microsoft risks merging EU antitrust teams with Office

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

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

On Tuesday, the European Commission announced that it had “informed Microsoft of its preliminary position that Microsoft violated EU antitrust rules by associating its Teams communications and collaboration product with popular productivity apps included in its Office 365 and Microsoft 365 business suites.”

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

Connecting teams, separating them

Teams’ competitor Slack Technologies said at the time that the 2017 move unfairly exploited Microsoft’s dominance in productivity software to crush the competition.

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

In July 2020, Slack (now owned by Salesforce) filed an official complaint against Microsoft, alleging that Redmond had illegally bundled Teams with its dominant productivity suite.

In July 2023, the European Commission launched an investigation into Microsoft’s bundling of Office and Teams following a 2020 complaint from Slack.

To head off antitrust concerns, Microsoft announced in August 2023 that it would begin separating Teams from Office in Europe.

In April 2024, Microsoft confirmed that the separation of the Teams collaboration tool from the Office product suite was completed in Europe and Switzerland.

Preliminary conclusions

This week, the European Commission said it had reached a “preliminary view that Microsoft breached EU antitrust rules” by bundling its Teams service with the popular Office 365 and Microsoft 365 productivity suites.

It noted that business application software providers, including Microsoft, are increasingly distributing this software as software as a service (“SaaS”), i.e. software hosted on cloud infrastructure selected by the provider.

The commission said it had made a preliminary determination that “Microsoft has a dominant position globally in the market for SaaS office applications for professional use.”

“The Commission is concerned that since at least April 2019, Microsoft has bundled the Teams service with its core SaaS productivity applications, thereby limiting competition in the market for communication and collaboration products and defending its market position in productivity software and its bundled model from competing standalone software providers,” the EU regulator said.

“The Commission is particularly concerned that Microsoft may have given Teams a distribution advantage by not giving customers a choice as to whether they want to access Teams as part of their SaaS productivity application subscriptions,” it said.

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

Potential penalty

If these practices are confirmed, these practices will violate Art. 102 of the Treaty on the Functioning of the European Union (“TFEU”), which prohibits the abuse of a dominant market position, the Commission said.

“We are concerned that Microsoft may be giving its own Teams communications product an undue competitive advantage by bundling it with popular business productivity suites,” said Margrethe Vestager, executive vice president of competition policy.

“Maintaining competition in remote communication and collaboration tools is essential because it also fosters innovation in these markets,” Vestager said. “If confirmed, Microsoft’s conduct would be illegal under our competition rules. Microsoft now has the opportunity to address 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) and other crimes.

In this latest case, Microsoft faces fines of as much as 10 percent of its global annual turnover if found guilty of the latest alleged antitrust violations.