European Union Launches Antitrust Investigation into Microsoft's Bundling Practices

The European Union has recently announced the initiation of a formal antitrust investigation targeted at Microsoft's bundling of Teams with Office 365 and Microsoft 365. This move comes in response to a complaint filed by rival workplace communication company Slack, which alleged that Microsoft unfairly bundled its collaboration and communication software with its widely used cloud-based productivity suites for businesses. The European Commission will be examining whether these practices violate EU competition rules by tying or bundling Teams to Office 365 and Microsoft 365.

Concerns Over Potential Market Abuse and Limited Competition

The European Commission expressed concerns that Microsoft might be leveraging its dominant market position in productivity software to restrict competition in the European Economic Area (EEA) for communication and collaboration products. Of particular interest is the possibility that Microsoft may be granting Teams a distribution advantage by not providing customers the choice to include or exclude access to the product when subscribing to their productivity suites, and by potentially limiting interoperability with competing offerings. Such practices could be deemed as "anti-competitive tying or bundling," thereby hindering other communication and collaboration tool providers, such as Slack, from competing on a level playing field.

A Microsoft spokeswoman responded to the investigation, stating that the company respects the work of the European Commission and takes its responsibilities seriously. Microsoft is committed to cooperating with the Commission and seeks to find solutions that address its concerns. Here’s what she said:

“We respect the European Commission’s work on this case and take our own responsibilities very seriously. We will continue to cooperate with the Commission and remain committed to finding solutions that will address its concerns.”

Delays in Response and Shifting Regulatory Landscape

Notably, two years ago, Slack urged EU regulators to act promptly on their complaint against Microsoft. While it may appear to be a straightforward issue of bundling and tying, the EU's regulatory landscape for digital giants has been evolving. Antitrust investigations typically take considerable time to complete. However, with the Digital Markets Act (DMA) now in effect, the EU's executive has gained additional antitrust enforcement powers. The DMA is directed at powerful digital intermediaries, or "gatekeepers," and competitive pinch-points for digital business. It imposes upfront obligations and restrictions on designated gatekeepers' core platform services, including limitations on self-favoring practices such as bundling or tying.

Microsoft may soon face upfront restrictions on its popular productivity suites, thanks to the DMA, which could create a more level playing field for its rivals. The Commission's enforcement of the DMA will determine which gatekeepers and core platform services will receive priority attention once the compliance deadline expires early next year. This revised regulatory landscape may have influenced the time taken by the Commission to respond to Slack's complaint about Microsoft.

As the investigation progresses, the implications for Microsoft's business and competition in the digital market will be closely monitored, and the outcomes of the DMA's enforcement will be eagerly awaited.