Microsoft risks huge fine over “possibly abusive” bundling of Teams and Office
Enlarge / A screen shows a virtual meeting with Microsoft Teams at a conference on January 30, 2024 in Barcelona, Spain.
Microsoft may be hit with a massive fine in the European Union for “possibly abusively” bundling Teams with its Office 365 and Microsoft 365 software suites for businesses.
On Tuesday, the European Commission (EC) announced preliminary findings of an investigation into whether Microsoft’s “suite-centric business model combining multiple types of software in a single offering” unfairly shut out rivals in the “software as a service” (SaaS) market.
“Since at least April 2019,” the EC found, Microsoft’s practice of “tying Teams with its core SaaS productivity applications” potentially restricted competition in the “market for communication and collaboration products.”
The EC is also “concerned” that the practice may have helped Microsoft defend its dominant market position by shutting out “competing suppliers of individual software” like Slack and German video-conferencing software Alfaview. Makers of those rival products had complained to the EC last year, setting off the ongoing probe into Microsoft’s bundling.
Customers should have choices, the EC said, and seemingly at every step, Microsoft sought instead to lock customers into using only its software.
“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,” the EC wrote. This alleged abusive practice “may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings.”
For Microsoft, the EC’s findings are likely not entirely unexpected, although Tuesday’s announcement must be disappointing. The company had been hoping to avoid further scrutiny by introducing some major changes last year. Most drastically, Microsoft began “offering some suites without Teams,” the EC said, but even that wasn’t enough to appease EU regulators.
“The Commission preliminarily finds that these changes are insufficient to address its concerns and that more changes to Microsoft’s conduct are necessary to restore competition,” the EC said, concluding that “the conduct may have prevented Teams’ rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area.”
Microsoft will now be given an opportunity to defend its practices. If the company is unsuccessful, it risks a potential fine up to 10 percent of its annual worldwide turnover and an order possibly impacting how the leading global company conducts business.
In a statement to Ars, Microsoft President Brad Smith confirmed that the tech giant would work with the commission to figure out a better solution.
“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,” Smith said.
The EC’s executive vice-president in charge of competition policy, Margrethe Vestager, explained in a statement why the commission refuses to back down from closely scrutinizing Microsoft’s alleged unfair practices.
“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,” Vestager said. “And preserving competition for remote communication and collaboration tools is essential as it also fosters innovation” in these markets.
Changes coming to EU antitrust law in 2025
The EC initially launched its investigation into Microsoft’s allegedly abusive Teams bundling last July. Its probe came after Slack and Alfaview makers complained that Microsoft may be violating Article 102 of the Treaty on the Functioning of the European Union (TFEU), “which prohibits the abuse of a dominant market position.”
Nearly one year later, there’s no telling when the EC’s inquiry into Microsoft Teams will end. Microsoft will have a chance to review all evidence of infringement gathered by EU regulators to form its response. After that, the EC will review any additional evidence before making its decision, and there is no legal deadline to complete the antitrust inquiry, the EC said.
It’s possible that the EC’s decision may come next year when the EU is preparing to release new guidance to more “vigorously” and effectively enforce TFEU.
Last March, the EC called for stakeholder feedback after rolling out “the first major policy initiative in the area of abuse of dominance rules.” The initiative sought to update TFEU for the first time since 2008 based on reviewing relevant case law.
“A robust enforcement of rules on abuse of dominance benefits both consumers and a stronger European economy,” Vestager said at that time. “We have carefully analyzed numerous EU court judgments on the application of Article 102, and it is time for us to start working on guidelines reflecting this case law.”
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