slack

Microsoft risks huge fine over “possibly abusive” bundling of Teams and Office

alfaview, anticompetitive behavior, Antitrust law, Digital Markets Act, European Commission, European Union, Google, microsoft, monopoly, Policy, SaaS, slack, software as a service / Ryan Harris / June 25, 2024

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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Slack users horrified to discover messages used for AI training

After launching Slack AI in February, Slack appears to be digging its heels in, defending its vague policy that by default sucks up customers’ data—including messages, content, and files—to train Slack’s global AI models.

According to Slack engineer Aaron Maurer, Slack has explained in a blog that the Salesforce-owned chat service does not train its large language models (LLMs) on customer data. But Slack’s policy may need updating “to explain more carefully how these privacy principles play with Slack AI,” Maurer wrote on Threads, partly because the policy “was originally written about the search/recommendation work we’ve been doing for years prior to Slack AI.”

Maurer was responding to a Threads post from engineer and writer Gergely Orosz, who called for companies to opt out of data sharing until the policy is clarified, not by a blog, but in the actual policy language.

“An ML engineer at Slack says they don’t use messages to train LLM models,” Orosz wrote. “My response is that the current terms allow them to do so. I’ll believe this is the policy when it’s in the policy. A blog post is not the privacy policy: every serious company knows this.”

The tension for users becomes clearer if you compare Slack’s privacy principles with how the company touts Slack AI.

Slack’s privacy principles specifically say that “Machine Learning (ML) and Artificial Intelligence (AI) are useful tools that we use in limited ways to enhance our product mission. To develop AI/ML models, our systems analyze Customer Data (e.g. messages, content, and files) submitted to Slack as well as other information (including usage information) as defined in our privacy policy and in your customer agreement.”

Meanwhile, Slack AI’s page says, “Work without worry. Your data is your data. We don’t use it to train Slack AI.”

Because of this incongruity, users called on Slack to update the privacy principles to make it clear how data is used for Slack AI or any future AI updates. According to a Salesforce spokesperson, the company has agreed an update is needed.

“Yesterday, some Slack community members asked for more clarity regarding our privacy principles,” Salesforce’s spokesperson told Ars. “We’ll be updating those principles today to better explain the relationship between customer data and generative AI in Slack.”

The spokesperson told Ars that the policy updates will clarify that Slack does not “develop LLMs or other generative models using customer data,” “use customer data to train third-party LLMs” or “build or train these models in such a way that they could learn, memorize, or be able to reproduce customer data.” The update will also clarify that “Slack AI uses off-the-shelf LLMs where the models don’t retain customer data,” ensuring that “customer data never leaves Slack’s trust boundary, and the providers of the LLM never have any access to the customer data.”

These changes, however, do not seem to address a key concern for users who never explicitly consented to sharing chats and other Slack content for use in AI training.

Users opting out of sharing chats with Slack

This controversial policy is not new. Wired warned about it in April, and TechCrunch reported that the policy has been in place since at least September 2023.

But widespread backlash began swelling last night on Hacker News, where Slack users called out the chat service for seemingly failing to notify users about the policy change, instead quietly opting them in by default. To critics, it felt like there was no benefit to opting in for anyone but Slack.

From there, the backlash spread to social media, where SlackHQ hastened to clarify Slack’s terms with explanations that did not seem to address all the criticism.

“I’m sorry Slack, you’re doing fucking WHAT with user DMs, messages, files, etc?” Corey Quinn, the chief cloud economist for a cost management company called Duckbill Group, posted on X. “I’m positive I’m not reading this correctly.”

SlackHQ responded to Quinn after the economist declared, “I hate this so much,” and confirmed that he had opted out of data sharing in his paid workspace.

“To clarify, Slack has platform-level machine-learning models for things like channel and emoji recommendations and search results,” SlackHQ posted. “And yes, customers can exclude their data from helping train those (non-generative) ML models. Customer data belongs to the customer.”

Later in the thread, SlackHQ noted, “Slack AI—which is our generative AI experience natively built in Slack—[and] is a separately purchased add-on that uses Large Language Models (LLMs) but does not train those LLMs on customer data.”