Microsoft has been accused by the EU of breaking antitrust rules. The European Commission says that by bundling Teams with Office 365 and Microsoft 365, the company disproportionately restricts competition in the communications app market.
The main reason is that Microsoft’s suite of productivity tools, including Excel, Outlook, and PowerPoint, is the world’s second most popular after Google Workspace. So when Teams is included by default with 365, it gives the company a so-called “distribution advantage.”
Customers are unlikely to look for another communications app if they have invested in 365 tools, and Teams automatically ships with them. Any interoperability limitations between Microsoft’s offerings and Teams’ competitors only exacerbate this problem.
“Such conduct may have prevented Teams’ rivals from competing and thus from innovating, to the detriment of customers in the European Economic Area,” the Commission said in a press release.
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In a prepared statement, Microsoft CEO Brad Smith told TechRepublic, “Following the separation of Teams and the initial steps to ensure interoperability, we appreciate the additional clarity we have today and will work to find solutions that address the Commission’s remaining concerns.”
Sabastian Niles, CEO of Salesforce, Slack’s parent company, said in a statement to TechRepublic: “The statement of objections issued today by the European Commission is a victory for customers in terms of choice and confirmation that Microsoft’s practices with respect to Teams harm competition.
“We appreciate the Commission’s thorough investigation of Slack’s complaint and call on the Commission to take swift, binding and effective corrective action that restores free and fair choice and promotes competition, interoperability and innovation in the digital ecosystem.”
How the accusations against Microsoft came about
The charges against Microsoft were brought via a Statement of Objections, a formal document setting out the Commission’s preliminary findings that a company may have breached EU antitrust rules. It concerns two investigations into Microsoft.
The initial investigation was initiated in July 2023 due to a complaint from Slack that accused Microsoft of “forcing (Teams) installs for millions, blocking removals, and hiding the true costs to enterprise customers.” The complaint was filed in July 2020 after the COVID-19 pandemic caused a global shift to remote work and remote collaboration tools like Teams, Slack, and Zoom became essential.
In July 2023, alfaview, a German videoconferencing solutions provider, filed a complaint similar to the one filed by Slack, and the European Commission opened a second investigation into it.
After launching an initial investigation, Microsoft separated Teams from Office in Europe before rolling out the change globally. However, the Commission considers the changes “insufficient” to restore competition and still violates Article 102 of the Treaty on the Functioning of the European Union, which prohibits abuse of a dominant market position.
What happens next?
The statement of objections is intended to inform Microsoft of the allegations made against it, and the company is now being asked to respond. There is no set deadline for such an investigation; however, if infringements are confirmed after Microsoft has exercised its right to defend itself, the company could be fined up to 10% of its worldwide annual 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 accused of violating EU rules. In 2004, the European Commission fined Microsoft €497 million for including Windows Media Player in the Windows operating system, because it limited competition from other media players. The company was required to offer versions of Windows without Windows Media Player, which led to Windows XP N being introduced in EU markets.
Five years later, the Commission opened an investigation into Microsoft for bundling Internet Explorer with Windows for the same reason. As a result, the tech giant was ordered to offer users a “browser selection” screen so they could choose their preferred web browser after installing Windows. Because this screen was not included in Windows 7 Service Pack 1 for 14 months after its launch, Microsoft was fined €561 million.
The United States also brought Internet Explorer to the forefront of a landmark antitrust case against Microsoft in 2001, which resulted in a settlement in which Microsoft agreed to change some of its business practices.
Microsoft is also at the center of a number of other investigations by EU and other international regulators. Its $75 billion acquisition of Activision Blizzard was finally approved last year after nearly two years of negotiations with the U.K. Competition and Markets Authority because of the potential impact on competition in the games industry.
The CMA, the US Department of Justice, and the Federal Trade Commission are reportedly still considering opening an investigation into Microsoft’s $13 billion partnership with OpenAI on antitrust grounds, but the EU has ruled it won’t do so. The Cloud Infrastructure Providers Association of Europe is also embroiled in a dispute with Microsoft over how its cloud licensing practices unfairly discriminate against competing cloud providers.
EU’s latest crackdown on tech giants
Microsoft is not the only company to come under EU scrutiny, as the bloc has been aggressively cracking down on monopolisation by large technology platforms in recent months.
On Monday, the European Commission formally accused Apple of violating the Digital Market Act because it does not allow software developers to “steer” users of their apps to third-party purchase options.
Meta could be accused of violating the DMA through its ad-free subscription tiers for Facebook and Instagram. These options create a so-called “pay-or-opt-in model” and “may not provide a viable alternative in the event that users do not consent,” the Commission said.
SEE: European Commission investigates Alphabet, Apple and Meta walled gardens under DMA
EU regulators are also investigating whether Google’s parent company Alphabet disproportionately favors Google Play and its own services in Google search results, and whether Amazon unfairly promotes its own products on its shopping platform.
TikTok may have breached the Digital Services Act by failing to properly assess the risk of its loyalty programme on TikTok Lite before its European launch, while X may have done the same for a number of reasons, including content moderation and advertising transparency. The Commission is investigating both cases.
