The European Commission (EC) has determined that Microsoft violated the region’s antitrust regulations by taking advantage of its market dominance to promote one of its communication tools, thus potentially harming consumers and competitors. To avoid potentially billions in fines, Microsoft can now request an oral hearing before the agency makes its final decision.
The European Union commission’s judgment comes as part of a complaint filed by Slack Technologies, owned by Salesforce, in 2020. The complaint alleged that Microsoft used the firm’s clout in the market to push forward its cloud-based communication and collaboration tool “Teams.” The EC said in a June 25 press release that Microsoft has been including Teams in its cloud-productivity applications like Office 365 and Microsoft 365 since at least April 2019, “thereby restricting competition on the market for communication and collaboration products.”
Microsoft granted Teams a “distribution advantage” by not giving subscribers the choice of whether to acquire Teams or not, the commission stated.
“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 innovating, to the detriment of customers in the European Economic Area.”
If these claims are confirmed, Microsoft would be deemed to have violated the Treaty on the Functioning of the European Union, which bans the abuse of a dominant market position in the region.
The commission can impose a fine of up to 10 percent of the company’s global annual turnover for these violations. Microsoft made over $211 billion in revenue during fiscal year 2023.
Brad Smith, vice chair and president of Microsoft, defended the company’s actions. “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,” he said in an email to The Epoch Times.
Microsoft unbundled Teams from Microsoft 365 and Office 365 suites in the European Economic Area and Switzerland beginning in October 2023, after the EU began its investigation on the matter in July.
In addition, the company vowed to enhance interoperability of Microsoft 365 and Office 365 suites with third-party apps and services. The firm also announced the creation of new mechanisms so that third parties could host Office web applications.
“We believe these changes balance the interests of our competitors with those of European business customers, providing them with access to the best possible solutions at competitive prices,” Microsoft said at the time.
Next Steps
While the European Commission acknowledged Microsoft’s changes, especially offering suites without Teams, the agency said that these updates were “insufficient to address its concerns.” The commission said that “more changes to Microsoft’s conduct are necessary to restore competition.”The agency sent a Statement of Objections detailing its findings on the issue to Microsoft. The company can now reply to the concerns raised by the commission and request an oral hearing to present its case, following which the agency will make a final decision.
Salesforce welcomed the EC’s decision. Sabastian Niles, the president and chief legal officer of the company, called the decision a “win for customer choice and an affirmation that Microsoft’s practices with Teams have harmed competition.”
He urged the commission “to move toward a swift, binding, and effective remedy that restores free and fair choice and promotes competition, interoperability, and innovation in the digital ecosystem.”
Microsoft is one of the seven companies that the European Commission has designated as a “gatekeeper” under the Digital Markets Act (DMA).
Microsoft was given time until March 7 to fully comply with all DMA regulations. On March 7, the company said that it took steps to be compliant with the DMA.
As part of these changes, Microsoft implemented new data-handling practices to ensure that data collected from Windows PCs regarding third-party applications would not be used for any competitive purpose against the developers of these applications.
