Dive Brief:
- The European Commission said Microsoft breached European Union antitrust rules by bundling Teams with the Office 365 and Microsoft 365 suites, according to a report issued Tuesday.
- “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,” Margrethe Vestager, the Commission’s EVP for competition policy, said in a statement. “If confirmed, Microsoft’s conduct would be illegal under our competition rules.”
- The commission opened an ongoing investigation into the tech giant’s software licensing practices last summer in response to a 2020 complaint filed by Slack Technologies, which is now owned by Salesforce. Microsoft now has an opportunity to respond to the Commission’s concerns, Vestager said.
Dive Insight:
Microsoft responded to the launch of the EU investigation by decoupling Teams from 365 in Europe last summer and then globally earlier this year. The Commission acknowledged the mitigations efforts but said unbundling the office productivity suite failed to bring the company’s products into compliance.
“The Commission preliminarily finds that these changes are insufficient to address its concerns and that more changes to Microsoft's conduct are necessary to restore competition,” the report noted. “In particular, the Commission is concerned that Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to their SaaS productivity application.”
While new customers have to purchase the collaboration application separately from 365, companies with an existing Teams SaaS bundle can maintain their discounted package.
“You're either grandfathered in or you're not.” Scott Bickley, advisory practice lead at Info-Tech Research Group, said. “If you now have to buy it separately, it costs more than the bundle.”
Competitors have also accused Microsoft of leveraging its dominant position in enterprise software to expand its Azure cloud empire, which now comprises one-quarter of the global public cloud market.
Cloud Infrastructure Service Providers in Europe, an alliance that includes AWS and more than a dozen smaller providers, filed a complaint against Microsoft in November alleging “discriminatory bundling” and practices that promote “technical and economic lock-in.”
Google Cloud filed a complaint with the U.S. Federal Trade Commission accusing Microsoft of anticompetitive business practices in cloud one year ago. The FTC initiated a cloud market investigation in March 2023 that remains ongoing.
The European Commission inquiry has no official deadline. The length of EU antitrust cases depends on case complexity and the degree of cooperation by the party under investigation, the Commission said. Microsoft has been granted the opportunity to submit a written reply and request an oral hearing.
Microsoft is weighing its options.
“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 Vice Chair and President Brad Smith said in a emailed statement.
