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May 5, 2023

Microsoft plots Office and Teams pricing changes to avoid EU antitrust investigation

Complaints from rival platform Slack, and others, have led to Microsoft apparently making concessions over its pricing models.

By Matthew Gooding

Microsoft’s continued efforts to stave off an antitrust investigation from the European Union – and a potentially heavy fine – could see it change the pricing models for its Office 365 productivity suite and Teams communication app, it has been reported. Rival vendors, led by Salesforce-owned Slack, have long complained that Microsoft’s bundling of Teams with Office 365 is anti-competitive.

Microsoft is changing the way it charges for Teams. (Photo by Daniel Constante/Shutterstock)

It is the latest European headache for Microsoft, which is also in the midst of negotiations with the EU, and European cloud providers, over how it charges for cloud products.

Microsoft to change pricing for Office 365 and Teams

Slack launched its complaint against Microsoft in July 2020, saying that the company was “force installing” Teams and blocking its removal. Microsoft launched Teams in 2017 as a rival to Slack in the workplace communication space. The app boomed in popularity during the Covid-19 pandemic, and now has more than 270 million daily active users, compared to Slack’s 20 million.

Slack and others contend that Microsoft including Teams as part of Office 365 gives it an unfair advantage. “They created a weak, copycat product and tied it to their dominant Office product, force installing it and blocking its removal,” David Schellhase, general counsel at Slack, said in 2020.

In November it was revealed that the European Commission was likely to launch an antitrust probe against Microsoft, using powers granted to it under the Digital Markets Act, legislation put in place to curb the power of Big Tech and gives the Commission powers to fine tech companies up to 10% of their turnover. Since then, MSFT has been working with lawmakers to try and avoid this investigation.

It seems it may have come up with a solution. According to Reuters, which cites two people familiar with the discussions. Microsoft is going to offer different options for Office 365, so customers can purchase it with or without Teams included. The Commission is said to be consulting Microsoft’s rivals, including Slack, on the proposal.

A European Commission spokesperson told Reuters: “We have received several complaints regarding Microsoft, including by Slack, regarding Microsoft’s conduct in relation to its Teams product. As you know the assessment is ongoing so we cannot comment further.”

Tech Monitor has contacted Microsoft and Slack for comment.

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Microsoft’s Euro woes continue

The Teams controversy is the latest battle with the Commission fought by Microsoft. It has been fined €2.2bn over the past decade for various breaches of EU competition law.

Speaking to Tech Monitor last year, Bo Lykkegaard, associate VP for software research at IDC Europe, said he considered it unlikely the Commission would want to take action in the case of Teams because it may then face a stream of “unbundling” complaints from other vendors.

“I consider it unlikely for the EU to unleash an unbundling wave,” Lykkegaard said. “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.”

Microsoft is also trying to head off an investigation into its cloud division. It has been at loggerheads with European cloud providers, a group of which last year raised a complaint against the tech giant over claims the licensing terms for its Azure cloud platform and other enterprise products were anti-competitive. A deal was apparently reached in March, and will see MSFT change the way it sells these packages in Europe, though this has yet to be confirmed.

Amit Zavery, senior vice president at Google Cloud, said at the time that Microsoft’s behaviour when it comes to the cloud is “anti-competitive”.

Read more: Microsoft unveils AI-powered Office 365 Copilot for Work

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