Microsoft’s bundling of Teams may have violated EU antitrust rules

Microsoft broke European Union competition law by bundling Teams with other Office 365 applications, the European Commission said in a preliminary finding published Tuesday. If Microsoft fails to defend itself, the company could face billions of dollars in fines and other penalties.

The EU’s antitrust regulator said it had sent Microsoft a statement of objections outlining its finding that the company had given its Teams communications service an unfair advantage by bundling it with subscriptions to Office 365 and Microsoft 365, the suite of software-as-a-service applications that also includes Word, Excel, and PowerPoint.

Teams enables workforce collaboration via video and chat and surged in popularity during the Covid-19 pandemic, reaching over 300 million global users in 2023.

“The Commission preliminarily finds that Microsoft is dominant worldwidein the market for SaaS productivity applications for professional use,” it said in a news release posted Tuesday.

The company’s practice since at least April 2019 to tie Teams to its core SaaS productivity apps has restricted market competition for similar products as well as defended Microsoft’s own “market position in productivity software as well as its suites-centric model from competing suppliers of individual software,” the Commission concluded.

“In particular, the Commission is concerned that 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 Commission’s said.

Interoperability limits between competing offerings and Microsoft’s apps also bolstered Microsoft’s advantage and prevented its rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area, the Commission said, referring to the 27 EU countries plus Iceland, Norway and Liechtenstein.

Investigation a year in the making

The decision follows a nearly year-long investigation that started last July and was sparked by a July 2020 competition complaint against the software giant by then enterprise messaging application Slack, which has since been bought by Salesforce.

Microsoft first unbundled Teams from its Office suites in the European Economic Area and Switzerland in August 2023 to try to appease EU officials during the investigation, then extended that move worldwide in April.

Neither effort apparently did anything to dissuade the Commission from considering Microsoft in violation of competition rules, a decision that was foreshadowed when the Competition said in May that it planned to include Teams in its inivestigation of Microsoft for anticompetitive practices despite the company’s concessions.

For its part, Microsoft plans to continue to address remaining concerns the Commission has over Teams as it awaits further decisions by the Commission, such as what, if any, financial consequences the company will face.

“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,” Brad Smith, Microsoft vice chair and president, said in a statement emailed to Computerworld.

The road ahead

Microsoft now gets a chance to present its defense. However, if it’s unable to sway the Commission from its preliminary decision, it could be forced to pay a fine of up to 10% of its annual worldwide revenue under EU law, and the Commission may also impose remedies to end the infringement.

“This EU chargesheet proves what was feared: Microsoft didn’t do enough to provide a level playing field to the Team’s competitors,” noted Pareekh Jain, CEO of EIIRTrend & Pareekh Consulting.

It now has its work cut out for it to unbundle Teams and create interoperability for competitors’ software to avoid penalties and damages, Jain noted.

It’s about a decade since EU regulators last levelled anti-trust charges against Microsoft: Its failure to offer Windows 7 users a choice of browser drew a €561 million (then about $731 million) fine.

To date, Microsoft has racked up around €2.2 billion ($2.4 billion) in fines for tying or bundling products together in a way that was deemed anti-competitive by EU regulators.