Microsoft Untangles Teams in European Markets
In response to mounting pressure stemming from a formal investigation initiated by the European Commission, Microsoft has unveiled its plans to untangle Teams from Office 365 and Microsoft 365 in European markets, marking a significant shift in its software bundling strategy.
The Antitrust Inquiry
The journey to this moment began three years ago when Slack filed a complaint that ultimately prompted the European Commission to launch an antitrust investigation into Microsoft’s practice of bundling its Teams application with its Office suite. The concern at the heart of this investigation revolved around potential violations of the European Union’s competition regulations.
Slack’s Complaint Sparks EU Antitrust Probe Against Microsoft
Slack’s formal grievance in July 2020, which triggered the EC’s investigation, was transparent: “Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers.” According to David Schellhase, General Counsel at Slack, their objective was simple: to foster fair competition and a level playing field. Schellhase emphasized that healthy competition stimulates innovation, offering customers a wider array of choices. In his words, “Competition and antitrust laws are designed to ensure that dominant companies are not allowed to foreclose competition illegally. We’re asking the EU to be a neutral referee, examine the facts, and enforce the law.”
EU Investigation Highlights Microsoft’s Potential Anticompetitive Practices
The European Commission’s investigation centered on concerns that Microsoft’s bundling of Teams with its other software offerings could place competing online meeting and communication software providers, such as Slack and others, at a disadvantage. The EC expressed apprehension that Microsoft’s practices “may constitute anticompetitive tying or bundling and prevent suppliers of other communication and collaboration tools from competing, to the detriment of customers in the European Economic Area.” Additionally, the Commission raised concerns that Microsoft might be leveraging and safeguarding its dominant market position in productivity software to stifle competition in the EEA for communication and collaboration products.
Unbundling Begins in October
In response to the concerns raised during the investigation, Nanna-Louise Linde, Vice President of Microsoft European Government Affairs, announced “proactive changes” aimed at addressing these concerns while cooperating with the European Commission’s ongoing investigation. These changes, involving the unbundling of Teams, will impact Microsoft 365 and Office 365 suites for business customers in the European Economic Area and Switzerland. Microsoft has laid out its plan as follows:
- Starting from October 1, 2023, Teams will be decoupled from Microsoft 365 and Office 365 suites in the EEA and Switzerland. Microsoft intends to offer these suites without Teams at a reduced price (€2 less per month or €24 per year).
- The company will enhance existing resources for interoperability with Microsoft 365 and Office 365, enabling companies like Zoom and Salesforce to create tailored and integrated experiences across Exchange, Outlook, and even Teams.
- Microsoft plans to develop new methods to enable third-party solutions to host Office web applications, similar to how it already functions within Teams.
History of Investigations
Notably, Microsoft has previously faced EU investigations over similar bundling practices. In the early 2000s, the EU compelled Microsoft to unbundle its media player from its Windows operating system, citing anticompetitive concerns. Over the past decade, Microsoft has incurred hefty EU antitrust fines totalling £1.9 billion due to practices that contravene EU competition regulations, primarily related to product bundling.
It’s essential to acknowledge that Microsoft is not the sole tech giant to attract antitrust investigations. In 2018, Google faced a £3.8 billion fine for pre-installing its search engine and browser on Android devices, seen as an abuse of its dominant position.
Implications for Businesses
For Microsoft, this move toward unbundling represents a strategic decision to conform to EU regulations rather than risk substantial fines, which could potentially reach up to 10 percent of its annual revenue. Given Microsoft’s dominant position in the market, any bundling practices have drawn swift scrutiny from competitors like Slack and Zoom, both of which have experienced substantial growth and gained influence since the surge in user numbers during the pandemic.
Microsoft contends that integrating modern communication and collaboration capabilities into its business suites aligns with customer expectations for contemporary workplace solutions. Nevertheless, Microsoft’s history and market dominance have left it with little choice but to accede to the unbundling demands.
From Slack’s perspective, this development may be seen as a long-overdue victory. For European customers, the positive aspect is that Microsoft’s suite of products without Teams bundled will come at a slightly lower cost. However, customers will still need to separately add Teams, potentially incurring an additional expense. It’s worth noting that Microsoft’s run-ins with antitrust rules are not unique, given the tech industry’s domination by a handful of major players, making future antitrust inquiries a possibility.
