Microsoft is expected to be the subject of an EU anti-trust investigation over the way it bundles its Teams collaboration tool with the Office 365 suite of products. The investigation is likely to be launched following a complaint by Salesforce, owner of Teams rival Slack, and could herald the start of more intense scrutiny on MSFT from Brussels as it enacts the Digital Markets Act.
The investigation hasn’t been confirmed by the EU but insiders speaking to Reuters revealed some of the details, claiming it would be a detailed investigation that would be looking for “information that allows them to define remedies” against Microsoft. This could include an unbundling order or fines.
It came about after a complaint from Slack last year, alleging Microsoft’s decision to bundle Teams with its Office 365 suite amounted to anti-competitive business practices, making it harder to sell competing products. It wanted Microsoft to unbundle Teams and sell it at market rate.
One person familiar with the process said the European Commission was preparing the ground for a full formal investigation but no details on when it might start or what it will investigate have been revealed and neither party has commented on the matter.
Laura Petrone, principal analyst at GlobalData said Microsoft has so far avoided the tech backlash from Washington and Brussels but that “the tide is turning” off the back of growing cloud revenues that have seen it close the gap on market leader, Amazon’s AWS.
“Consequently [Microsoft] is attracting more scrutiny from rival companies and regulators alike,” Petrone says. “In particular, its recent changes to licensing fees have attracted criticism, as they have increased costs for customers using its software on rival cloud platforms.”
Microsoft has been trying to avoid a full review of its licencing deal since the Slack complaint was lodged last year but Petrone says it is now clear that won’t be enough for regulators. “Brussels now has a brand-new set of rules—enshrined in the Digital Markets Act—setting out a list of dos and don’ts to ensure minimum conditions to avoid monopolies,” she explains.
The Digital Markets Act: Gatekeepers like Microsoft kept in check by EU
The Digital Markets Act was first proposed in December 2020 and covers ten core platform services including web browsers, advertising, virtual assistants, cloud computing and communication services among others.
It is designed to place restrictions on platform “gatekeepers” that prevent companies from placing undue controls and restrictions on the market they serve. It includes allowing for the easy uninstall of pre-installed apps, unsubscribe from core platform services and easier integration for third party tools.
It isn’t clear whether the tying and bundling practices Microsoft has become famous for now fall under a list of prohibited behaviours or not but Petron says it will at least draw additional scrutiny, particularly when linked to Azure, the Microsoft cloud platform.
“There will be more of this type of scrutiny in the cloud market as government and private organizations increasingly rely on cloud services from large providers,” she said.
Bo Lykkegaard, associate VP for software research at IDC Europe disagrees that it will result in action or even further scrutiny. He said an EU process could take years before reaching a conclusion and would be unlikely to have any impact on the market in the short term.
“I consider it unlikely for the EU to unleash an unbundling wave,” Lykkegaard says. “When we’ve seen during the past years is that categories in the software world have blurred. Before you had a business application on its own, development tools were a completely different category, collaboration and document tools something completely separate, cloud hosting as well, and integration and reporting as well. All different categories, but not so much anymore.”
Teams has been “connected at the hip” to Office 365 and fully integrated with the system becoming a key expression of a meeting in Outlook and the binding agent that allows for document collaboration, Lykkegaard says. Therefore Any solution that would satisfy Salesforce would be “forced and akward,” the analyst argues
“Microsoft could be forced to ‘break out’ Teams as a separately priced component of Office 365,” Lykkegaard adds. “This would be somewhat artificial, as most customers would expect Teams to be included in Office.” Alternatively it “could be forced to facilitate combinations of Office with Slack or other collaboration solutions. However, this is also awkward given the deep integration between the document solutions and Outlook and Teams.
Lykkegaard concludes: “We are in a world where software siloes are getting broken down as solutions combine many elements natively. Fortunately, it is also a world of interoperability, where customers expect to be able to combine their favourite software solutions, where it makes sense.”