Microsoft faces mega fine after EU takes issue with bundling of Teams and Office

By Hanna Ziady and Brian Fung, CNN

London (CNN) — Microsoft has violated European Union antitrust laws by bundling Teams with its other popular applications for businesses, EU officials said Tuesday, marking the bloc’s latest challenge to a US tech giant.

If confirmed, the preliminary findings of an EU investigation could lead to a fine of up to 10% of Microsoft’s global revenue, which totaled $211 billion in its latest financial year.

The announcement comes a day after EU regulators accused Apple (AAPL) of breaching the bloc’s landmark Digital Markets Act, a groundbreaking law that forced big changes on dominant tech platforms after it came into force in March. Apple, which has denied wrongdoing, also faces a huge fine if the charges are confirmed.

The actions by the EU could result in changes to the way hundreds of millions of Europeans access services on some of the world’s biggest digital platforms, reflecting a big push by European lawmakers to rein in the power of Big Tech.

The European Commission, the EU’s executive arm, opened an investigation into Microsoft’s software practices almost a year ago following a complaint in 2020 by the cloud-based internal messaging app Slack, which is now owned by Salesforce (CRM).

Slack alleged that Microsoft (MSFT) had given Teams, which offers messaging, calling and video meetings, an unfair advantage by automatically including it with its Office software and thereby denying Slack an opportunity to compete on a level playing field.

The European Commission shares Slack’s worries. “We are concerned that Microsoft may be giving its own communication product Teams an undue advantage over competitors, by tying it to its popular productivity suites for businesses,” the EU’s competition chief Margrethe Vestager said in statement.

“Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation on these markets. If confirmed, Microsoft’s conduct would be illegal under our competition rules,” she added.

According to the Commission, Microsoft has been forcing customers to acquire Teams by automatically including the tool in its Office 365 and Microsoft 365 suites.

The company’s advantage over rivals “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,” the Commission said.

Microsoft announced last year that it would stop the Teams bundling practice in Europe and extended the same commitment globally in April.

But, while the Commission acknowledged that the company had started offering “some suites without Teams,” it said it believes “more changes to Microsoft’s conduct are necessary to restore competition.”

In a statement, Microsoft President Brad Smith said: “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.”

Salesforce, meanwhile, welcomed the Commission’s findings, calling its actions “a win for customer choice and an affirmation that Microsoft practices with Teams have harmed competition.”

This story has been updated with additional information.

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