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July 18, 2023

EU ‘to investigate Microsoft’ over Teams and Office 365 bundling

The Big Tech company could be in hot water over the way it sells its productivity suite.

By Matthew Gooding

The EU is set to open a formal investigation into whether Microsoft bundling its Teams collaboration app with its Office 365 productivity suite is unfair to rival software companies. The tech giant has been fighting hard to avoid such an investigation by offering concessions to EU lawmakers but appears to have failed.

Microsoft
Microsoft is set to be investigated by the EU over bundling Teams with Office. (Photo by monitcello/Shutterstock)

News of the investigation would be a fresh headache for MSFT, coming just days after it secured a court victory in its battle to win approval for the proposed $69bn purchase of gaming company Activision Blizzard.

Why is Microsoft being investigated over Teams and Office bundling?

The EU’s interest in Microsoft’s productivity tools stems from a complaint from another platform, Slack, made back in 2020, which said that Teams was being “force installed” for Office customers. Launched in 2017, Microsoft developed Teams as an alternative to Slack, now owned by Salesforce, in the workplace communication space, and it boomed in popularity during the Covid-19 pandemic. It has more than 270 million daily active users, compared with Slack’s 20 million.

Opponents say including Teams as part of Office 365 has given it an unfair advantage and spurred its growth. “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.

Now it seems EU lawmakers believe their claims have some merit, with the FT reporting that a formal probe could be launched as soon as next week, citing four sources familiar with European Commission thinking. If charges are upheld, Microsoft could be punished under the Digital Markets Act, which gives the EU the power to fine Big Tech companies up to 10% of global turnover.

As reported by Tech Monitor, news of a potential investigation first emerged last November, and since then Microsoft has been trying to make concessions that will satisfy the EU. In April, it suggested different pricing tiers for Office 365, with and without Teams included, but according to the FT this has been rejected because it would only apply to customers in the EU, not the rest of the world.

Last week, MEP Stéphanie Yon-Courtin queried why Slack’s complaint had yet to be dealt with. “Three years after the complaint was lodged, Microsoft’s dominant position in the market has grown, while the complainant is still waiting for meaningful progress in this case,” she said in a written question to the commission, calling for action to be taken swiftly.

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Tech Monitor has contacted Microsoft and the EU for comment.

Activision Blizzard court victory boosts Microsoft amid regulatory woes

Microsoft has been ensconced in various regulatory battles around the world over recent months, with its position in the cloud market being questioned in the US and by the UK’s communications regulator, Ofcom.

European cloud providers, meanwhile, have complained the pricing structure for the company’s Azure cloud platform unfairly penalises them, making a formal submission to the EU about the situation. It is thought this is on the verge of being resolved, with Microsoft having made Azure pricing changes last year, though a formal agreement has yet to be announced.

However, Microsoft does appear closer to completing its purchase of Activision Blizzard, having successfully challenged US regulator the Federal Trade Commission’s (FTC) desire to block the deal at a hearing that concluded last week. The UK’s Competition and Markets Authority, which had said in April that it would block the deal because it could stifle competition in the cloud gaming market, has since signalled it may be prepared to soften its stance. The EU gave its blessing to the acquisition in May.

Read more: Microsoft unveils Office 365 AI Copilot for work

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