Microsoft could face a huge fine in the European Union for “potentially unlawful” bundling of Teams with its Office 365 and Microsoft 365 business software suites.
On Tuesday, the European Commission (EC) announced preliminary findings from an investigation into whether Microsoft’s “suite-centric business model that combines multiple types of software into a single offering” unfairly rivals the “software as a service” (SaaS) market excludes. .
“Since at least April 2019,” the EC found, Microsoft’s practice of “linking Teams to its core SaaS productivity applications” potentially limited competition in the “market for communications and collaboration products.”
The EC is also “concerned” that the practice has helped Microsoft defend its dominant market position by excluding “competing suppliers of individual software” such as Slack and German videoconferencing software Alfaview. Makers of these competing products had filed a complaint with the European Commission last year, launching the ongoing investigation into Microsoft’s bundling.
Customers should have choices, the EC said, and at every step Microsoft seemed to be trying to force customers to use only its software.
“Microsoft may have given Teams a distribution advantage by not giving customers the choice of whether or not to access Teams when subscribing to their SaaS productivity applications,” the EC wrote. This alleged abusive practice “may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings.”
For Microsoft, the EC’s findings are probably not entirely unexpected, although Tuesday’s announcement must be disappointing. The company had hoped to avoid further scrutiny by making some major changes last year. Most drastically, Microsoft started offering “some suites without Teams,” the EC said, but even that wasn’t enough to satisfy EU regulators.
“The Commission provisionally considers that these changes are not sufficient to address its concerns and that further changes in Microsoft’s behavior are necessary to restore competition,” the EC said. The EC concluded that “the conduct may have prevented Teams’ rivals from competing and in turn innovating, at the expense of customers in the European Economic Area.”
Microsoft now gets the chance to defend its practices. If the company fails, it faces a possible fine of up to 10 percent of annual global sales and an order that could potentially impact the way the leading global company does business.
In a statement to Ars, Microsoft President Brad Smith confirmed that the tech giant would work with the commission to come up with a better solution.
“Now that we have unbundled Teams and taken the first interoperability steps, we appreciate the additional clarity provided today and will work to identify solutions to address the committee’s remaining concerns,” Smith said.
Margrethe Vestager, executive vice president of the European Commission responsible for competition policy, explained in a statement why the commission refuses to withdraw from closely investigating Microsoft’s alleged unfair practices.
“We are concerned that Microsoft is giving its own communications product Teams an unnecessary advantage over the competition by linking it to its popular business productivity suites,” Vestager said. “And maintaining competition in remote communications and collaboration tools is essential because it also promotes innovation” in these markets.
Changes in EU competition law in 2025
The EC initially started its investigation into Microsoft’s allegedly unlawful Teams bundling in July last year. The investigation came after the makers of Slack and Alfaview complained that Microsoft may be violating Article 102 of the Treaty on the Functioning of the European Union (TFEU), “which prohibits abuse of a dominant market position.”
Almost a year later, it is impossible to say when the EC’s investigation into Microsoft Teams will end. Microsoft will have a chance to review all evidence of infringement collected by EU regulators to form a response. Thereafter, the EC will assess all additional evidence before making a decision, and there is no legal deadline to conclude the antitrust investigation, the EC said.
It is possible that the European Commission’s decision will come next year, as the EU prepares to release new guidelines to enforce the TFEU more ‘strongly’ and effectively.
Last March, the EC called for feedback from stakeholders following the rollout of “the first major policy initiative on abuse of dominance rules”. The initiative aimed to update the TFEU for the first time since 2008, based on a review of the relevant case law.
“Robust enforcement of rules against abuse of dominance benefits both consumers and a stronger European economy,” Vestager said at the time. “We have carefully analyzed numerous decisions by European courts on the application of Article 102, and it is time for us to start working on guidelines that reflect this case law.”