Microsoft faces major antitrust fine over Teams integration with Office 365

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

The charges, which Microsoft can dispute, represent the most serious 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 the number of users skyrocketing from 20 million in 2019 to 300 million in 2023, according to Statista. The European Commission’s preliminary survey results, released on Tuesday, claim that Microsoft has a global occupies a dominant position in the professional “software as a service” (SaaS) market. The Commission expressed concern that Microsoft has unfairly tied Teams to its core Office 365 products, disadvantaging competitors that offer standalone messaging platforms such as Slack.

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

The Commission highlighted that Microsoft’s strategy to bundle Teams with Office 365 may have provided an unfair distribution advantage as customers who subscribed to Office 365 were not given the choice to opt out of purchasing Teams.

In an effort to avoid 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’ and emphasized that greater adjustments were needed.

Brad Smith, vice chairman and president of Microsoft, responded by saying: “Now that we’ve unbundled Teams and taken the first interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the remaining to address the committee’s concerns.”

The antitrust investigation began last July after complaints from Slack Technologies, a Canadian company now owned by Salesforce, and German videoconferencing software provider Alfaview. Niko Fostiropoulos, CEO of Alfaview, welcomed the Commission’s preliminary findings, stating 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 could not eliminate competitive concerns.

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