Following pressure resulting from a formal investigation by the European Commission over a possible breach of competition rules, Microsoft has announced that it will begin unbundling Teams from Office 365 and Microsoft 365 in European markets.
Following a complaint by Slack three years ago, this July the European Commission opened an antitrust investigation into Microsoft’s bundling of its Teams app with its Office suite over concerns that it could be in breach of the EU’s competition rules.
In the July 2020 complaint that led to the EC investigation, Slack said on its website: “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”.
David Schellhase, General Counsel at Slack said: “Slack simply wants fair competition and a level playing field. Healthy competition drives innovation and creates the best products and the most choice for customers. 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.”
The Investigation – Concerns
The EC’s investigation centred on concerns that Microsoft’s bundling of Teams with its other software could put rival online meetings and communications software (like Slack and others) at a disadvantage. The EC said 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”, and that, “The commission is concerned that Microsoft may be abusing and defending its market position in productivity software by restricting competition in the EEA for communication and collaboration products.”
Will Unbundle It, Starting In October
Microsoft’s response to the concerns outlined in the investigation has been for Nanna-Louise Linde, Vice President, Microsoft European Government Affairs to announce, “proactive changes that we hope will start to address these concerns in a meaningful way, even while the European Commission’s investigation continues and we cooperate with it.”
The ‘proactive changes’ (unbundling) will impact Microsoft 365 and Office 365 suites for business customers in the European Economic Area and Switzerland. Microsoft says that, in the coming months, it will take the following steps:
– Beginning October 1, 2023, Teams will be unbundled from Microsoft 365 and Office 365 suites in the EEA and Switzerland. Microsoft says that instead it will simply sell these offerings without Teams at a lower price (€2 less per month or €24 per year).
– It will enhance its existing resources on interoperability with Microsoft 365 and Office 365, e.g. to allow companies like Zoom and Salesforce to create tailored and integrated experiences across Exchange, Outlook and even Teams.
– It will create new ways to enable third-party solutions to host Office web applications. For example, Microsoft says it will develop a new method for hosting the Office web applications within competing apps and services, much like it already does in Teams.
As some commentators have pointed out, Microsoft has been investigated before by the EU for similar bundling practices. For example, in the early 2000s, the EU ordered Microsoft to unbundle its media player from its Windows operating system, arguing that the bundling practice was anticompetitive. In fact, Microsoft has incurred £1.9bn in EU antitrust fines over the last decade for practices that breach EU competition rules, e.g. by bundling products together.
That said, Microsoft certainly doesn’t have the ‘monopoly’ on triggering antitrust investigations. For example, back in 2018, Google was fined £3.8 billion for pre-installing its search engine and browser on Android devices, which was seen as an abuse of its dominant position.
What Does This Mean For Your Business?
Having already incurred almost a couple of £ billion in fines from the EU over antitrust-related issues in the last decade, it seems that Microsoft would now rather comply than have to offer more self-limiting remedies and risk a mega-fine of (potentially) up to 10 per cent of its total annual turnover. The dominant position of its suite of products means that any bundling is jumped-upon quickly by competitors, some of whom (Slack and Zoom) have grown dramatically and gained in power, share, and influence since the pandemic restrictions skyrocketed their user-numbers.
In its defence, Microsoft says that including modern communication and collaboration capabilities in its business suites was simply in response to what customers expect from a modern work solution. Unfortunately, Microsoft’s market dominance and history make it difficult for Microsoft to do anything other than hold its hand up and politely agree to unbundling.
For competitors like Slack, this may seem like a victory and something that’s long overdue. For customers in Europe, the positive spin is that Microsoft’s suite of products without Teams bundled will cost a little less, but then there’s still the added inconvenience of having to add Teams and then presumably pay the bit of extra money on top for it. As mentioned above, Microsoft’s certainly not the only big tech company to have run into problems over antitrust rules and since the tech world is still dominated by just a few major players, it’s unlikely to be the last time we see this sort of thing.