European Commission Launches Investigation Against Microsoft for Integrating Teams With Office

The European Commission:

In particular, the Commission is concerned that Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to their SaaS productivity applications. 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 confirmed, these practices would infringe Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits the abuse of a dominant market position.

After the Commission opened proceedings in July 2023, Microsoft introduced changes in the way it distributes Teams. In particular, Microsoft started offering some suites without Teams. The Commission preliminarily finds that these changes are insufficient to address its concerns and that more changes to Microsoft’s conduct are necessary to restore competition.

I can see the argument from regulatory proponents, that unbundling Teams from Office in some packages, after the fact, is too little too late. That the damage from abusing their dominant position was already done. But still, what more does the EC want?

The sending of a Statement of Objections does not prejudge the outcome of an investigation.

Translation: They’re guilty and we’re just going through the motions of giving them a chance to state their case.

If the Commission concludes, after the company has exercised its rights of defence, that there is sufficient evidence of an infringement, it can adopt a decision prohibiting the conduct and imposing a fine of up to 10% of the company’s annual worldwide turnover. The Commission may also impose on the company any remedies which are proportionate to bring the infringement effectively to an end.

My read on this is that the EC’s stance is that its designated gatekeeping companies — all of which happen, by sheer coincidence I’m repeatedly told, to be from the US or Asia — should be forbidden from evolving their platforms to stay on top. That churn should be mandated by law.

I mean of course Microsoft had an advantage by being able to bundle Teams with Office. But Office needs something like Teams to remain relevant today. If Office had never evolved after achieving a dominant position in the market, it would still be sold in boxes full of floppy disks. Moving from licensed installations to SaaS was inevitable if Office was to remain relevant, and adding a collaborative communication layer like Teams was essential in today’s world.

The EC, to my eyes, is saying that it’s illegal for a successful platform to adapt and evolve. Or at the very least they’re saying they might deem it illegal. And once again it’s the EC itself that is proclaiming its threat to fine Microsoft up to 10 percent of its annual global revenue, and I’ll wager, once again, that the EU itself comprises less than 10 percent of Microsoft’s revenue. They’re threatening fines incommensurate with their market size.

I think the EC expects these companies to capitulate. To bend their entire global strategy to the whims of EC bureaucrats, and just accept being handcuffed. But what’s clearly happening is that the these gatekeepers are reading the writing on the wall, and are going to postpone all new features and products in the EU until after they have assurances that they’re compliant under EU law. The EC thinks they’re going to handcuff these companies, but instead all they’re doing is setting the entire EU market months, or even years, behind the rest of the world for new products and services. In some cases those products and services will just never come to the EU at all.

Surely the lesson Microsoft is taking from this is not that they were wrong to bundle Teams with Office, but that they were wrong to offer their integrated service in the EU.

★ Thursday, 27 June 2024