European Commission declares Microsoft’s bundling of Teams with M365 anti-competitive

Microsoft broke European Union (EU) antitrust rules by bundling in its cloud-based communications and collaboration software Teams when users purchased its online productivity suite, Office 365.

That is the preliminary view of the European Commission’s (EC) ongoing investigation into the distribution strategy of Microsoft Teams, which began in July 2023 in response to two separate complaints from communication software providers, Slack and Alfaview.

The EC said it has made Microsoft aware of its judgment, which comes eight months after the software giant announced plans in October 2023 to unbundle Teams from its Microsoft 365 and Office 365 suites when sold in the European Economic Area (EEA) and Switzerland.

Microsoft said at the time of the move that it hoped selling the products separately would enable its customers to purchase its Office 365 and Microsoft 365 products at a lower price point. It also committed to doing “more to make interoperability easier between rival communication and collaboration” offerings.

As reported by Computer Weekly, Microsoft stopped selling Teams as a bundle with Microsoft 365 and Office 365 worldwide in April 2024.

However, the EC said the preliminary findings of its investigation show this change in go-to-market strategy for Teams is “insufficient to address its concerns” and “more changes to Microsoft’s conduct are necessary to restore competition”.  

In a statement announcing its preliminary findings, the Commission said its investigation shows that Microsoft dominates the global market for business-focused software-as-a-service (SaaS) productivity applications, and that bundling Teams with Office 365 was an anti-competitive move.

“The Commission is concerned that, since at least April 2019, Microsoft has been tying Teams with its core SaaS productivity applications, thereby restricting competition on the market for communication and collaboration products,” it said.

“In particular, the Commission is concerned that Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to [its] SaaS productivity applications.”

It continued: “This advantage may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings. The conduct may have prevented Teams’ rivals from competing, and in turn innovation, to the detriment of customers in the European Economic Area.”

In a statement to Computer Weekly, Brad Smith, vice-chair and president of Microsoft, said the company has already taken some actions to address the EC’s concerns, and will look for ways to do more in light of its findings.

“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,” said Smith.

News of the European Commission’s findings come hot on the heels of the UK’s competition watchdog, the Competition and Markets Authority (CMA), publishing the interim findings of its own investigation into allegations of anti-competitive behaviour pertaining to Microsoft’s licensing practices.

Nicky Stewart, former ICT chief at the UK government’s Cabinet Office, said she’s not surprised to hear that, despite its efforts to unbundle Teams from its productivity software packages, the European Commission still has concerns about the company’s behaviour.

“It’s not surprising the European Commission still has concerns … given the ubiquity of Microsoft’s software packages and the interoperability issues between these and those of Microsoft’s competitors,” she said. “Yet again, we have seen Microsoft doing too little, too late, and this is rightly driving the European Commission’s preliminary view.”

She added: “With Microsoft also under scrutiny by the CMA for, amongst other things, unfair software licensing practices, where the CMA will offer a preliminary opinion this coming autumn, it remains to be seen whether Microsoft will adopt a similar tactic here in the UK and make a gesture that is essentially doing the bare minimum to avoid regulatory sanctions.”