Microsoft Faces Major Antitrust Fine Over Teams Integration with Office 365

Thousands of Microsoft employees across the United States will be given unlimited days off in an overhaul of its holiday policy.

Microsoft is facing a substantial antitrust fine following allegations from the European Commission that it illegally bundled its chat and video app Teams with its Office 365 suite, including products like Word.

These accusations, which Microsoft can contest, mark the most severe charges against the company since 2013, when it was fined €561 million (£474 million) for failing to promote rivals to its Internet Explorer browser.

The Teams platform saw a surge in usage during the pandemic, with user numbers skyrocketing from 20 million in 2019 to 300 million by 2023, according to Statista. The European Commission’s preliminary investigation findings, released on Tuesday, assert that Microsoft holds a dominant position globally in the professional “software as a service” (SaaS) market. The Commission expressed concerns that Microsoft has been unfairly tying Teams to its core Office 365 products, disadvantaging competitors who offer standalone messaging platforms like Slack.

“Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation in these markets. If confirmed, Microsoft’s conduct would be illegal under our competition rules. Microsoft now has the opportunity to reply to our concerns,” stated Margrethe Vestager, the executive vice-president for competition policy at the European Commission.

The Commission highlighted that Microsoft’s strategy of bundling Teams with Office 365 may have provided it with an unfair distribution advantage, as customers were not given a choice to opt out of acquiring Teams when subscribing to Office 365.

In an attempt to preempt regulatory action, Microsoft announced earlier this year that it would unbundle Teams from some software packages sold in Europe. However, regulators deemed these changes “insufficient,” insisting that more significant adjustments were necessary.

Brad Smith, Microsoft’s vice-chair and president, responded by saying, “Having unbundled Teams and taken initial interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the commission’s remaining concerns.”

The antitrust inquiry began last July after complaints from Slack Technologies, a Canadian company now owned by Salesforce, and the German video conference software provider Alfaview. Niko Fostiropoulos, CEO of Alfaview, welcomed the Commission’s preliminary findings, asserting that Microsoft’s countermeasures were inadequate as they continued to bundle Teams with essential Office 365 components. Fostiropoulos also noted that direct negotiations with Microsoft failed to resolve the competition concerns.

As the situation develops, Microsoft must now address these allegations and work with the European Commission to find a resolution that satisfies the regulatory body’s competition rules. The outcome of this case could have significant implications for the tech giant and the broader SaaS market.