Microsoft Risks EU Fine After Antitrust Warning Over Teams

Microsoft Corp. risks a hefty European Union fine after regulators accused the company of abusing its market power by bundling the Teams video-conferencing app to its other business software.

The European Commission said it fired off a so-called statement of objections alleging that Microsoft’s practice of tying Teams to its Office 365 and Microsoft 365 packages fell foul of the bloc’s competition rules.

The EU regulator said that since at least 2019, Microsoft’s behavior protected its dominance on the market and gave Teams an advantage over rivals. This unfair advantage was also boosted by limited interoperability between Teams and competing software, watchdogs added.

“Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation on these markets,” the EU’s competition commissioner Margrethe Vestager said on Tuesday.

Penalties for antitrust violations can be as high as 10% of a company’s global revenue, although they seldom reach that level.

So far Microsoft’s attempts to sidestep deeper scrutiny of its behavior have failed to sway regulators. But the company promised to weigh further concessions that could may allow it to avoid punishment.

“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,” Microsoft President Brad Smith said in a statement.

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The EU’s formal warning comes after messaging platform Slack made a complaint to the EU’s antitrust watchdog 2019. Slack was acquired by Salesforce Inc., a provider of cloud-based customer management software, in a $27.7 billion deal in 2021. Like many of its peers, it’s been hit by a slowdown in tech spending after the pandemic -- announcing plans to cut about 10% of headcount after staffing nearly tripled in the past four years.

Salesforce President Sabastian Niles welcomed the commission’s warning and urged the regulator “to move towards a swift, binding, and effective remedy that restores free and fair choice.”

The use of Microsoft’s Teams video app soared during the pandemic, when lockdowns across the globe forced millions into remote working and social distancing. Within a short period of time, the application has grown from around 2 million worldwide daily users in its first year of operation in 2017, to 300 million in 2023, according to data from Statista.

Critics say Microsoft was able to leverage its power over PC software to make Teams the easiest option for remote workers already using programs like Word and Excel.

Microsoft has spent years battling antitrust regulators in the US and Europe over complaints that it unfairly tied products and blocked rivals’ access to the desktop Windows software. But it’s not faced any formal EU market dominance scrutiny in a decade, since a 2013 fine for not complying with a pledge to offer a choice of web browsers.

In total, Microsoft has racked up more than €2 billion ($2.1 billion) in EU fines for antitrust abuses, but it has largely avoided more rigorous antitrust scrutiny over its behavior in recent years, with Google taking most of the flak over how it has abused its dominance.

Microsoft’s $69 billion swoop for games developer Activision Blizzard piqued the interested of competition regulators globally, with the EU eventually approving the deal with concessions after initially issuing a formal warning against the deal.