What you need to know The European Commission has shared its preliminary view with Microsoft that the tech giant has breached EU antitrust rules by bundling Microsoft Teams with Microsoft 365.The Commission's view is that Microsoft relayed dominance in the productivity software space to restrict competition for communication and collaboration tools.Microsoft started offering some suites of productivity software without Teams in July 2023, but the European Commission preliminarily found the changes to be "insufficient."

Microsoft finds itself under the microscope of the European Commission once again. The tech giant has been informed that the European Commission has preliminarily found Microsoft to be in violation of antitrust rules. The situation revolves around Microsoft's bundling of Teams with Microsoft 365, which came under legal scrutiny in Europe last summer.

The European Commission opened its investigation of Microsoft's bundling practices in July 2023. At the core of the investigation is a single question: Has Microsoft abused its dominance in the productivity software space to create an unfair advantage for Microsoft Teams?

"Remote communication and collaboration tools like Teams have become indispensable for many businesses in Europe," said Margrethe Vestager, Executive Vice-President in charge of competition policy back in July 2023.

"We must therefore ensure that the markets for these products remain competitive, and companies are free to choose the products that best meet their needs. This is why we are investigating whether Microsoft’s tying of its productivity suites with Teams may be in breach of EU competition rules."

Almost one year later, it appears the European Commission has found, at least preliminarily, that Microsoft did abuse its dominant market position. Part of the European Commission's press release states:

"The Commission preliminarily finds that Microsoft is dominant worldwide in the market for SaaS productivity applications for professional use.

The Commission is concerned that, since at least April 2019, Microsoft has been tying Teams with its core SaaS productivity applications, thereby restricting competition on the market for communication and collaboration products and defending its market position in productivity software and its suites-centric model from competing suppliers of individual software."

A key concern of the Commission is that Microsoft may have gained a "distribution advantage" since for several years it was not possible for organizations to subscribe to Microsoft 365 without also getting access to Microsoft Teams. Interoperability limitations between Teams and productivity suites other than Microsoft 365 may also be a contributing factor.

What's next for Microsoft Teams? Microsoft may have to take further action to separate Teams from Microsoft 365 to become compliant with EU law. (Image credit: Future)

At this point, the European Commission's view is only preliminary. If that view is confirmed through further investigation, Microsoft would be in violation of Article 102 of the Treaty on the Functioning of the European Union.

Earlier this year, Microsoft began offering Teams as a standalone app and gave organizations the option to subscribe to Microsoft 365 without gaining access to Teams. Microsoft announced the decision shortly after the European Commission opened its investigation into bundling practices. But these changes are "insufficient" in the eyes of the European Commission. The body states that "more changes to Microsoft's conduct are necessary to restore competition."

Now that the European Commission has shared its preliminary findings, Microsoft has the right to look at the documents from the Commission and reply in writing. Microsoft also has the option to request an oral hearing to present a case to the European Commission and national competition authorities.

If after that process the European Commission finds that Microsoft is in violation of Article 102 of the Treaty on the Functioning of the European Union, the governing body can prohibit Microsoft from the conduct in question and impose a fine up to 10% of Microsoft's annual worldwide turnover. Alternatively, the Commission can make Microsoft apply remedies to the situation that would make Microsoft's conduct in line with Article 102.