Unbundling Sales Ineffective: EU Preliminarily Finds Microsoft Teams in Monopolistic Behavior

Over the past few years, there have been numerous discussions between Microsoft and the European Union regarding the monopolistic issues surrounding Microsoft Teams. Now, Microsoft Teams is no longer bundled with Windows 11, and its licensing has been separated from Microsoft 365 instead of being bundled with the purchase of a Microsoft 365 license.

Despite previous rumors suggesting that Microsoft would reach an agreement with the EU to avoid antitrust litigation, the outcome has not been in Microsoft's favor. In its latest press release, the EU has preliminarily determined that Microsoft Teams engages in monopolistic behavior.

However, it's not entirely accurate to put it this way. The EU's official wording was to send a Statement of Objections to Microsoft, but sending such a statement does not prejudge the outcome of the investigation. This means Microsoft still has an opportunity to settle with the EU and avoid litigation.

So, what is the EU's stance? After years of investigation, the EU has preliminarily determined that Microsoft holds a dominant position in the global market for SaaS productivity applications for professional use. The EU is concerned that Microsoft's bundling practices limit competition in the market for communication and collaboration products and that Microsoft, through its dominant position and suite-centric business model, avoids infringement by individual competing software vendors.

The EU also emphasized the issue of bundling, stating that licensing bundling within Microsoft 365 actually grants a distribution advantage to Microsoft Teams. Coupled with interoperability restrictions between other software developers and Microsoft's productivity tools, this effectively prevents competition from Teams' rivals, hinders innovation, and harms the interests of EU customers.

Should the EU ultimately determine that Microsoft Teams is in violation, Microsoft could be sued for breaching Article 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant market position.

Despite Microsoft's later changes to the licensing of Microsoft Teams, the EU preliminarily found these changes insufficient to address its concerns, indicating that more modifications to Microsoft's behavior are necessary to restore competition.

If the EU proceeds with antitrust litigation against Microsoft, the maximum penalty could amount to 10% of Microsoft's global total revenue from the previous year. Considering past cases, the penalty could reach several billion dollars, representing a significant financial hit for Microsoft.