Microsoft Corp . (NASDAQ:MSFT) could face a major fine from the European Union after regulators accused the company of abusing its market power by bundling the Teams video-conferencing app with its other business software.
The European Commission, EU’s executive arm, issued a statement of objections, alleging that Microsoft's practice of including Teams with its Office 365 and Microsoft 365 packages violated the bloc’s competition rules.
The EU regulator stated that since at least 2019, Microsoft's actions have protected its market dominance and unfairly advantaged Teams over its competitors. This advantage was further strengthened by the limited interoperability between Teams and rival software, according to the watchdogs.
“Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation on these markets,” said Margrethe Vestager, the EU’s competition commissioner.
Penalties for antitrust violations can be as high as 10% of a company’s global revenue, although they rarely reach that level.
Microsoft’s attempts to avoid deeper scrutiny have so far been unsuccessful. However, the company has pledged to consider further concessions 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,” said Microsoft President Brad Smith in a statement.
The EU’s formal warning follows a complaint by messaging platform Slack to the EU’s antitrust watchdog in 2019.
Slack was acquired by Salesforce (NYSE:CRM) a leader in cloud-based customer management software, for $27.7 billion in 2021.
Microsoft’s Teams video app saw a massive surge in use during the pandemic, as lockdowns worldwide pushed millions into remote work and social distancing. According to Statista, the application grew rapidly from around 2 million daily users globally in its first year of operation in 2017 to 300 million in 2023.
Critics argue that Microsoft leveraged its dominance in PC software to make Teams the most convenient choice for remote workers already using other Microsoft programs like Word and Excel.