In a press release, the European Commission (EU) announced a formal investigation to examine whether Microsoft (NASDAQ: MSFT) has violated EU competition regulations by bundling its communication and collaboration tool, Teams, with its popular business suites, Office 365 and Microsoft 365. This move comes in the wake of a surge in remote work and cloud-based software adoption in recent years.
The investigation aims to ascertain whether Microsoft’s practices restrict competition and limit customer choice in the European Economic Area (EEA).
Microsoft, Teams, and Remote Work
Microsoft, a global technology company, offers a wide range of products, including productivity and business software, cloud computing, and personal computing solutions. Teams, a cloud-based communication and collaboration tool, allows users to engage in messaging, calling, video meetings, and file sharing. It integrates various workplace tools and third-party applications, enhancing workplace efficiency and collaboration.
In recent years the transition to remote work and the adoption of cloud-based communication and collaboration software facilitated the emergence of new market players and business models offering subscription-based cloud software. Such cloud-based solutions eliminate the need for in-house data centers and allow customers to use multiple software types from different providers.
Integration of MS Teams with Office 365
Microsoft has integrated Teams into its established cloud-based productivity suites for business customers, namely Office 365 and Microsoft 365. The European Commission expresses concern that this integration might grant Teams an unfair distribution advantage. Customers subscribing to these productivity suites may not have the option to exclude Teams, potentially limiting competition. Moreover, the Commission suspects that Microsoft may have restricted interoperability between its suites and competing communication and collaboration tools, potentially stifling competition in the EEA.
Potential Breach of EU Competition Rules
If the investigation substantiates the claims, Microsoft’s actions could be considered anti-competitive tying or bundling, which violates Article 102 of the Treaty on the Functioning of the European Union (TFEU). This article prohibits the abuse of a dominant market position that hampers competition within the EU and affects trade.
The formal investigation was initiated based on a complaint lodged by Slack Technologies, Inc (NYSE:WORK) against Microsoft on July 14, 2020. The EU’s Antitrust Regulation enables the Commission to take action against anti-competitive practices. By opening proceedings, the Commission assumes authority, relieving the national competition authorities of their competence in dealing with the case. National courts are also required to refrain from making decisions conflicting with the Commission’s ongoing proceedings.
The Wrap
The European Commission’s in-depth investigation into Microsoft’s bundling practices aims to safeguard competition and customer interests within the European Economic Area. The outcome remains uncertain, and there is no fixed timeline for concluding the antitrust investigation. If Microsoft is found guilty of violating EU competition rules, it may face significant penalties and be compelled to make changes to its business practices to foster fair competition and consumer choice in the market.
