EU Investigates Microsoft Over Teams Bundling With Office

Microsoft on Thursday has run into trouble in the European Union, after its competition regulator announced an official investigation.

The European Commission announced that it has opened an investigation into “possible anticompetitive practices by Microsoft regarding Teams.”

The investigation has been expected. Earlier this month Microsoft was reportedly facing a new antitrust investigation over Teams integration into Office 365 after remedy talks had failed.

EC investigation

The Commission had been unhappy at Microsoft’s offer of remedies which failed to address the regulator’s concerns.

Microsoft had begun discussions with the European Commission in 2022 over remedies that could make a formal probe unnecessary, and reportedly offered to cut the price of Office when Teams was not included.

The Commission was seeking a steeper price cut than Microsoft was willing to offer.

Now the formal investigation has begun over concerns whether Microsoft may have breached EU competition rules by bundling its communication and collaboration product Teams, to its popular suites for businesses – namely Office 365 and Microsoft 365.

The EC said that the Coronavirus pandemic accelerated a shift to remote working as well as businesses’ transition to the cloud and the adoption of cloud-based software for communication and collaboration.

The regulator pointed out that Microsoft enjoys a “well-entrenched cloud-based productivity suites for business customers” with Office 365 and Microsoft 365, but the Commission is concerned that Microsoft may be abusing and defending its market position in productivity software by restricting competition in the European Economic Area for communication and collaboration products.

The Commission is particularly concerned that Microsoft may grant Teams a distribution advantage by not giving customers the choice on whether or not to include access to that product when they subscribe to their productivity suites and may have limited the interoperability between its productivity suites and competing offerings.

Teams integration

Microsoft had added its Teams app to Office 365 in 2017 for free, with the aim to eventually replace Skype for Business.

Teams rival Slack Technologies said at the time that the 2017 move took unfair advantage of Microsoft’s dominance in productivity software to crush competition.

In July 2020 Slack (now owned by Salesforce) submitted a complaint against Microsoft, alleging that Microsoft illegally tied Teams to its dominant productivity suites.

Anti-competitive?

The Commission on Thursday said these practices may constitute anti-competitive tying or bundling and prevent suppliers of other communication and collaboration tools from competing, to the detriment of customers in the European Economic Area.

“Remote communication and collaboration tools like Teams have become indispensable for many businesses in Europe,” said Margrethe Vestager, executive VP in charge of competition policy.

“We must therefore ensure that the markets for these products remain competitive, and companies are free to choose the products that best meet their needs,” said Vestager. “This is why we are investigating whether Microsoft’s tying of its productivity suites with Teams may be in breach of EU competition rules.”

The EU has fined the Redmond, Washington-based software giant some 2.2 billion euros (£1.9bn) over the past ten years for breaching competition rules, including by bundling various products together, such as integrating its own browsers or media players into Windows.