Microsoft faces hefty fines after EU investigation into unfair Teams bundles

In a word: An EU investigation accuses Microsoft of violating antitrust regulations by bundling Teams with its Office 365 and Microsoft 365 subscriptions. The move is seen as having restricted competition from communications software rivals like Slack and giving Microsoft an unfair advantage in the market. If found guilty, the company faces hefty fines.

European Union regulators have accused tech giant Microsoft of violating their antitrust laws by tying Microsoft Teams to its Office 365 and Microsoft 365 subscription services, after a lengthy investigation into the company’s practices.

In a Statement of Objections published today, the European Commission said its objections to Microsoft’s practices revolve around the fact that the company gains an unfair distribution advantage by not allowing consumers to choose whether or not to adopt the communications service. “The Commission is concerned that Microsoft has given Teams a distribution advantage by not giving customers the choice of whether or not to acquire access to Teams when they subscribe to their SaaS productivity applications,” the statement said.

“This advantage may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings. This conduct may have prevented Teams’ rivals from competing, and therefore innovating, to the detriment of customers in the European Economic Area.”

The Commission says that if these practices were found to be true, they would violate Article 102 of the Treaty on the Functioning of the European Union (TFEU), which aims to prevent the abuse of a dominant market position by an entity . The European Commission opened its investigation into this matter on July 27, 2023, after rival Slack Technologies, Inc. filed a complaint. A subsequent complaint was also filed by German videoconferencing company Alfaview, which had similar grievances .

Microsoft unbundled Teams from some of its SaaS packages to try to address these complaints in July 2023, but the Commission says the changes were not enough to “restore competition.” Competition in this case is from other communications services like plaintiffs Slack and Alfaview. Since Windows and the Office suite are dominant worldwide, this means that many home and business consumers are adopting Teams as their de facto communications application because it comes bundled with these software packages. This, in turn, can restrict competition.

“Preserving competition for remote communication and collaboration tools is essential, as it also promotes innovation in these markets,” says Margrethe Vestager, vice-president in charge of competition policy. “If confirmed, Microsoft’s behavior would be illegal under our competition rules. Microsoft now has the opportunity to address our concerns.”

Microsoft President Brad Smith previously issued a statement to the Financial Times, saying that “having unbundled Teams and taking the first interoperability steps, we appreciate the additional clarity provided today and will work to find solutions. solutions to address the Commission’s remaining concerns.

The company faces heavy fines of up to 10% of its global annual turnover if it is found to have infringed Article 102, and the European Commission can also impose other “remedial measures” that it considers “proportionate” to bring the infringement to an end. Microsoft still has the right to defend itself against these allegations.

This is not the first time Microsoft has faced these types of antitrust allegations. Last year, the company faced heavy pressure from the US FTC and its UK equivalent when it attempted to acquire gaming giant Activision Blizzard due to its market dominance – Microsoft has ultimately acquired the game publisher.