The European Commission has issued a preliminary statement indicating that Microsoft may have violated EU antitrust regulations by integrating its Teams communication tool with its widely-used productivity suits, Office 365 and Microsoft 365.
This action by the Commission raises important questions about competitive practices in the software-as-a-service (SaaS) market and Microsoft’s business strategies.
According to the Commission, Microsoft has increasingly shifted towards a SaaS model, where software is hosted on the cloud and accessed via the Internet. This model, while offering flexibility and ease of access, also allows companies like Microsoft to bundle various services, potentially stifling competition from smaller, more specialised providers. This practice could violate Article 102 of the Treaty of Functioning of the European Union (TEFU).
Article 102 prohibits abuse of a dominant market position. Regulation No 1/2003 governs these rules, allowing the Commission and national competition authorities to act against such infringement.
“We are concerned that Microsoft may be giving its own communication product Teams an undue advantage over competitors, by tying it to its popular productivity suites for businesses,” said Margrethe Vestager, Executive VP in charge of completion policy.
Issuing the Statement of Objections is a formal step in EU antitrust investigations. It details the specific issues and allows the company in question to respond. This process does not prejudge the investigation’s outcome but signals serious concerns from the regulatory body.
The European Commission’s investigation highlights concerns that Microsoft’s practice of bundling Teams with its core productivity suits has limited competition in the market for communication and collaboration tools.
Since April 2019, Microsoft has included Teams in its Office 365 and Microsoft 365 subscriptions, which the Commission argues could restrict customers’ choice and disadvantage competing products.
The Commission’s preliminary findings suggest that Microsoft’s strategy has provided Teams with an unfair distribution edge, potentially hampering innovation and limiting options for consumers within the European Economic Area.
Furthermore, interoperability issues between Teams and rival products could exacerbate these competitive imbalances.
The investigation into Microsoft’s practices began following a complaint from Slack Technologies, now part of Salesforce, in July 2023, with a similar complaint from Alfaview GmbH shortly thereafter. Both companies raised issues regarding Microsoft’s integration of Teams with its productivity suites.
In response to the Commission’s proceedings in July 2023, Microsoft adjusted its distribution methods, offering certain productivity suites without Teams. However, the Commission has deemed these changes insufficient to address the competitive concerns. The Commission demands more comprehensive modifications to restore a level playing field to other smaller distributors and developers.
If the Commission’s investigation concludes that Microsoft has indeed breached antitrust rules, it could impose fines of up to 10% of the company’s global annual turnover and mandate specific remedies to halt the anti-competitive behaviour.
“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 Financial Times.
Yesterday, the Commission initiated a formal proceeding against Apple’s violation of the Digital Markets Act.
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