Microsoft has been charged by the EU for breaking antitrust rules. The European Commission claims that by bundling Teams into the Office 365 and Microsoft 365 suites, the company disproportionately restricts competition in the market for communication apps.
The primary reason for this is because Microsoft’s suite of business productivity tools, like Excel, Outlook and PowerPoint, is the second most popular worldwide after Google Workspace. Therefore, when Teams is included with 365 by default, it gives the company a so-called “distribution advantage.”
Customers are unlikely to seek out another communications app if they have invested in the 365 tools, and Teams comes with them automatically. Any interoperability limitation between Microsoft’s offerings and Teams’ competitors exacerbates this issue.
“The conduct may have prevented Teams’ rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area,” claimed the Commission in a press release.
SEE: Microsoft Bets Big on UK AI With $3.2bn Investment
In a prepared statement, Microsoft president Brad Smith told TechRepublic, “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.”
Sabastian Niles, the president of Slack’s parent company Salesforce, told TechRepublic in a statement, “The Statement of Objections issued today by the European Commission is a win for customer choice and an affirmation that Microsoft’s practices with Teams have harmed competition.
“We appreciate the Commission’s thorough investigation of Slack’s complaint and urge the Commission to move towards a swift, binding, and effective remedy that restores free and fair choice and promotes competition, interoperability, and innovation in the digital ecosystem.”
How the charges against Microsoft came about
The charges against Microsoft have been brought about through a Statement of Objections, which is a formal document outlining the Commission’s preliminary findings that a company may have violated EU antitrust laws. It relates to two investigations into Microsoft.
The first investigation was opened in July 2023 due to a complaint by Slack alleging that Microsoft was “force installing (Teams) for millions, blocking its removal, and hiding the true cost to enterprise customers.” The complaint was made in July 2020 after the COVID-19 pandemic spurred a global transition towards working from home and remote collaboration tools like Teams, Slack and Zoom became essential.
In July 2023, alfaview, a German video conferencing solution provider, filed a complaint similar to Slack’s, and the European Commission launched a second probe as a result.
After the initial investigation was launched, Microsoft unbundled Teams from Office in Europe before enacting the change globally. However, the Commission regards these changes as “insufficient” to restore competition, and it is still infringing Article 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant market position.
What happens next
The Statement of Objections intends to inform Microsoft of the charges raised against it, and it is now invited to respond. There is no set deadline for an investigation like this; however, if the violations are confirmed after Microsoft has exercised its rights of defence, it could be fined up to 10% of its annual worldwide turnover. The EU could also impose remedies to restore competition.
Previous investigations into Microsoft’s conduct by international regulators
The Teams investigation is not the first time Microsoft has been charged for breaching EU regulations. In 2004, the European Commission fined Microsoft €497 million for bundling Windows Media Player with its Windows operating system, as this stifled competition from other media players. The company was ordered to offer a version of Windows without Windows Media Player, resulting in Windows XP N being launched in EU markets.
Five years later, the Commission launched an investigation into Microsoft for bundling Internet Explorer with Windows for the same reason. The tech giant was ordered to offer users a “browser choice” screen to select their preferred web browser upon installation of Windows as a result. Since this screen was not included in Windows 7 Service Pack 1 for 14 months after its launch, Microsoft was fined €561 million.
The U.S. also brought the Internet Explorer issue to light in a landmark antitrust case against Microsoft in 2001, which resulted in a settlement where Microsoft agreed to modify some of its business practices.
Microsoft is also at the centre of a number of other investigations with the EU and other international regulators. Its $75 billion acquisition of Activision Blizzard was finally cleared last year after almost two years of negotiations with the UK’s Competition and Markets Authority due to its potential impact on competition in the gaming industry.
The CMA, the U.S.’s Justice Department and the Federal Trade Commission are reportedly still considering launching an investigation into Microsoft’s $13 billion partnership with OpenAI on antitrust grounds, but the EU ruled not to do so. The Association of Cloud Infrastructure Services Providers in Europe is also embroiled in a dispute with Microsoft over how its cloud licensing practices unfairly disadvantage rival cloud service providers.
EU’s recent crackdown on tech giants
Microsoft is not alone in being scrutinised by the EU, as the bloc has been cracking down hard on the monopolisation from big tech platforms in recent months.
On Monday, Apple was formally charged by the European Commission for violating the Digital Markets Act because it is not allowing developers to “steer” their apps’ users to third-party purchase options.
Meta could be charged for violating the DMA through its ad-free subscription tiers for Facebook and Instagram. These options create a so-called “pay or consent model” and “may not provide a real alternative in case users do not consent,” the Commission stated.
SEE: European Commission Examines Alphabet, Apple and Meta’s Walled Gardens Under the DMA
EU regulators are also investigating whether Alphabet, Google’s parent company, disproportionately favours Google Play and its own services within Google Search results and whether Amazon unfairly promotes its own products on its shopping marketplace.
TikTok may have violated the Digital Services Act by not conducting an appropriate risk assessment of its rewards programme on TikTok Lite before its European launch, while X could have done the same for a number of reasons, including content moderation and advertising transparency. The Commission is investigating them both as a result.
