EU charges Microsoft with antitrust violations for bundling Teams with other products

European Union regulators have charged Microsoft with illegal bundling practices involving its Teams chat app and its Office 365 and Microsoft 365 subscriptions. This move marks the first antitrust charge against Microsoft in the EU in 15 years, following previous cases concerning the bundling of Windows Media Player and Internet Explorer.

The European Commission has preliminarily determined that Microsoft violated EU antitrust rules by tying Teams, its communication and collaboration product, to its popular productivity suites, Office 365 and Microsoft 365. A statement of objections was issued, outlining the Commission’s concerns over this practice.

Margrethe Vestager, head of competition policy in Europe, expressed worries that Microsoft might be giving its own communication product, Teams, an unfair advantage by bundling it with its productivity suites for businesses. Vestager stated that if this conduct is confirmed, it would be illegal under EU competition rules. She added that Microsoft now has the opportunity to respond to these concerns.

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Despite Microsoft’s attempts to address these issues by unbundling Teams from Office 365 in Europe last year and later making Teams a separate app globally, the formal charges have not been avoided.

Microsoft’s Response
Microsoft responded by expressing its commitment to resolving the EU’s concerns. Brad Smith, Microsoft’s president, mentioned that the company appreciates the clarity provided by the Commission and will work towards solutions to address the remaining issues.

The investigation into Microsoft’s bundling practices began last year after a complaint from Slack in July 2020. Slack accused Microsoft of illegally tying its Teams product to Office, force-installing it for millions of users, blocking its removal, and hiding the true cost to enterprise customers. This complaint led the European Commission to open an antitrust investigation into the bundling of Teams.

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Sebastian Niles, president and chief legal officer of Salesforce, Slack’s parent company, praised the statement of objections as a win for customer choice and a step towards restoring competition. Niles emphasized the importance of moving towards a swift, binding, and effective remedy that promotes free and fair choice, competition, interoperability, and innovation in the digital ecosystem.

Potential Consequences for Microsoft
If found guilty of antitrust violations, Microsoft could face a fine of up to 10 per cent of its annual worldwide turnover. The European Commission may also require Microsoft to change its software products, similar to past actions.

For example, in 2004, the Commission required Microsoft to offer a version of Windows without the bundled Media Player, resulting in the Windows XP N version for EU markets. Additionally, in 2009, Microsoft was forced to implement a browser ballot in its Windows operating system to ensure users had a choice of web browsers after years of bundling Internet Explorer with Windows. Microsoft was fined $730 million in 2013 for failing to include the browser ballot in Windows 7 SP1.

The outcome of this case could have significant implications for the tech industry, especially regarding how major software companies bundle their products and services. It also highlights the EU’s dedication to maintaining fair competition and preventing market dominance by a few large players. As the investigation progresses, it will be closely monitored by industry stakeholders, legal experts, and competitors.