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June 25, 2024

EU charges Microsoft for antitrust violations over Teams bundling

The European Commission alleges Microsoft’s practice of bundling Teams with Office 365 and Microsoft 365 constitutes an abuse of its dominant market position.

By Tech Monitor Staff

The European Commission has accused Microsoft of breaching EU antitrust rules by bundling Teams with Office 365 and Microsoft 365. A statement of objections submitted to Microsoft signals the Commission’s concern over potential anti-competitive practices that could stifle innovation and limit consumer choice in the software market.

Teams mobile
The European commission charges that Microsoft’s bundling strategy with Teams gives it an unfair advantage. (Photo by wichayada suwanachun/Shutterstock)

The Commission’s investigation, prompted by complaints from Slack Technologies and alfaview, centres on Microsoft’s practice of integrating Teams into its business software suites since April 2019. This bundling strategy, the Commission argues, may have provided Teams with a significant distribution advantage, limiting the ability of competitors to offer alternative communication and collaboration tools.

The Commission’s objections are grounded in Article 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant market position. These provisions are enforced through Regulation No 1/2003, applicable by both the Commission and national competition authorities.

“The Commission is 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,” Margrethe Vestager, executive vice-president of the European Commission for A Europe Fit for the Digital Age. “Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation in these markets.”

Market Dominance and Potential Abuse

Microsoft 365 is used by over a million companies worldwide according to company statistics, including over 65% of the Fortune 500. Previously branded as Office 365, it is a group of software applications providing productivity related services to its subscribers, including Outlook, OneDrive, Word, Excel, PowerPoint, OneNote, SharePoint and Microsoft Teams.

Inter-platform integration is key feature of Microsoft’s suite-centric business model, where multiple software solutions are bundled together. However, by including Teams in its Office 365 and Microsoft 365 suites without offering customers a choice to opt-out, the allegation is that Microsoft may have restricted competition. The Commission highlighted that interoperability limitations between Teams’ competitors and Microsoft’s offerings could further entrench Teams’ market position, disadvantaging rival products and potentially hindering innovation.

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In response to the investigation, which began in July 2023, Microsoft has made some changes to how it distributes Teams, including offering certain suites without Teams. However, the Commission deems these measures insufficient to address its concerns.

Response and Remedies

A Statement of Objections is a formal step in EU antitrust investigations, allowing the concerned party to review the Commission’s findings, respond in writing, and request a hearing. If the Commission concludes that Microsoft has violated antitrust rules, it can impose a fine of up to 10% of the company’s annual worldwide turnover and mandate changes to end the anti-competitive conduct.

There is no fixed timeline for the completion of antitrust investigations, as the duration depends on case complexity, company cooperation, and the exercise of rights of defence. The outcome of this investigation will be closely watched by the tech industry and regulators worldwide, given its potential implications for how software services are bundled and sold.

Microsoft is not alone in facing scrutiny from an increasingly bullish regulatory climate in the EU. Recently, several major tech firms, including Apple and Meta, have encountered such challenges. Such cases highlight European efforts to promote fair competition in the digital market, preventing dominant players from leveraging their market positions to unfairly disadvantage competitors or monopolise segments. It is an approach Big Tech has become more vocal in voicing its opposition to, saying it actually stifles investment and opportunity.

Read more: EU finds Apple in breach of new competition act, opening additional investigation into its practice

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