The European Commission has delivered a statement of objections to Microsoft over “possibly abusive” practices in bundling Teams and Office together.
In the latest update to the Teams and Office bundling anticompetition saga, the EU’s antitrust regulatory body posted its preliminary finding that Microsoft might have created a competitive imbalance.
The issue stems from the integration of Teams into Office 365 in 2017, which later evolved to replace Skype for Business. The regulators are scrutinising whether this move has led to restricting business customers’ options by making Teams a default part of the Office 365 and Microsoft 365 subscriptions without a clear alternative choice. This preliminary assessment will delve into whether such practices could potentially hinder competition.
“The European Commission has informed Microsoft of its preliminary view that Microsoft has breached EU antitrust rules by tying its communication and collaboration product Teams to its popular productivity applications included in its suites for businesses Office 365 and Microsoft 365,” read the European Commission’s press release.
The Commission is concerned that, since at least April 2019, Microsoft has been tying Teams with its core SaaS productivity applications, thereby restricting competition on the market for communication and collaboration products and defending its market position in productivity software and its suites-centric model from competing suppliers of individual software.”
The EU added that, if confirmed, these practices would infringe Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits the abuse of a dominant market position.
Since the investigation formally launched in July 2023, Microsoft has announced it is unbundling Teams from Office, first in Europe and then globally. However, the EU has deemed these concessions insufficient and that more changes to Microsoft’s conduct are necessary to restore competition.
Should the EU find substantial proof of a breach, it has the authority to issue a ruling that prohibits the contentious behaviour and potentially impose a penalty. This fine could amount to as much as 10 percent of Microsoft’s global annual revenue, which would double up as a significant deterrent against such infringements.
“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,” Microsoft President Brad Smith told The Financial Times in rebuttal to the statement of objections.
The Story So Far
The European Commission initiated a formal probe into Microsoft’s practice of bundling its products following a complaint by Slack in 2020.
In response to the scrutiny, Microsoft separated its platforms in Europe last year. Then, in April of this year, the company expanded this unbundling globally, citing “feedback” from the European Commission. This move was widely interpreted as Microsoft’s strategy to preemptively address antitrust concerns before any formal ruling.
However, these efforts did not satisfy the European Commission, which clearly intends to proceed with issuing charges.
Smith had anticipated this course of action, however. Earlier this month, speaking to journalists in Brussels, Smith said Microsoft was ready to take “additional steps” to address the European Commission’s concerns about its bundling of Teams and Office.
It remains to be seen what the “additional steps” to assuage EU concerns might be and whether they will have a material impact on the European Commission’s assessment of potentially anticompetitive practices.
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