News
- Microsoft Made Three Concessions to EU Investigators — The biggest was Microsoft's announcement it will unbundle Teams from Microsoft 356 in EEA and Switzerland as of Oct. 1.
- EU Antitrust Investigation Will Continue —The investigation officially launched in July and will move forward in spite of the concessions.
- Slack and Microsoft Rivalry at its Roots — The investigation was spurred on by a 2020 complaint filed by Slack about Microsoft's anticompetitive practices.
Microsoft announced yesterday that it will unbundle its Teams app from Microsoft 365 and Office 365 suites in Europe in an effort to appease European Union regulators, which launched an antitrust investigation against the company in July.
The change will go into effect on Oct. 1 and will apply to the European Economic Area and Switzerland. The EEA includes the 27 member countries of the European Union, as well as Iceland, Norway and Liechtenstein.
Antitrust Investigation
"Today we are announcing proactive changes that we hope will start to address these concerns in a meaningful way, even while the European Commission’s investigation continues and we cooperate with it," wrote Microsoft's vice president of European government affairs, Nanna-Louise Linde. As as a result, companies will be able to buy Microsoft 365 without Teams at a reduced price.
That wasn't the only concession the company made. It also committed to making it easier for third-party vendors to work with Teams, as well as enable third-party solutions to host Office web applications.
The European Commission launched the investigation in July following months of discussions with Microsoft. The inquiry originated with a complaint lodged by Slack in 2020, before its acquisition by Salesforce.
The complaint alleged that Microsoft illegally tied its Teams product into its market-dominant Office productivity suite, which was forcing millions of users to access it and prevented those users from blocking its removal.
Slack issued a statement at the time stating it was confident that it could compete on its own terms in the productivity space, but it could only do so on a level playing field.
“We’re confident that we win on the merits of our product, but we can’t ignore illegal behavior that deprives customers of access to the tools and solutions they want,” said Jonathan Prince, VP of communications and policy at Slack, in the statement. "Slack threatens Microsoft’s hold on business email, the cornerstone of Office, which means Slack threatens Microsoft’s lock on enterprise software."
Teams vs. Slack
At the time the complaint was lodged, the incident appeared to be just the latest in a series of increasingly acrimonious exchanges between the two companies following Microsoft's launch of Teams in 2016, epitomized by the full page ad taken out by then Slack CEO Stewart Butterfield in the New York Times.
That feeling when you think "we should buy a full page in the Times and publish an open letter," and then you do. 💫 pic.twitter.com/BQiEawRA6d
— Stewart Butterfield (@stewart) November 2, 2016
Up until Salesforce's $27.7B acquisition of Slack in December 2020, the two companies fought each other on a feature-by-feature basis for traction in the communications and collaboration market. Microsoft had dominated that market since the 2011 launch of Office 365, which in turn evolved into Microsoft 365 in 2017.
Teams had been bundled into Microsoft 365 to became the communications and collaboration hub of the suite. In 2019, Microsoft announced it would include Teams in the monthly builds for existing installations moving forward.
In a tech community post, Microsoft explained that starting on Jul. 9, 2019, click-to-run functionality would install the Teams client on all PCs on the monthly channel, and on the semi-annual channel starting Jan. 14, 2020. This effectively made Teams impossible to avoid once you had taken out a Microsoft 365 subscription.
This final action is what apparently pushed Butterfield to lodge the complaint with the European Commission. In an interview with The Verge in May 2020, he said that inside Slack, the company felt that “Microsoft is perhaps unhealthily preoccupied with killing us, and Teams is the vehicle to do that.” In July, the company lodged the complaint with the European Commission.
Microsoft's Concessions
While the workings of the European Union are slow even in good years, they are implacable. The concessions by Microsoft are unlikely to stop the investigation into what happened before and after the compliant was originally made from moving forward. The specifics of the three concessions Linde outlined are as follows:
1. Teams in Microsoft 365
As of Oct.1 this year Microsoft will unbundle Teams from Microsoft 365 and Office365 in the EEA and Switzerland. Enterprises will be offered a reduction of €2 (approx. $2.17) per user/per month, or €24 (approx. $26) per user/per year. This will be offered to customers on enterprise plans.
Teams will still be available as a standalone offering to new enterprise customers at €5 per user/per month. Those that are already signed up to one of the plans will stay on their current plan unless they opt to drop Teams.
2. Interoperability
This is the second major issue highlighted in the Slack complaint. It stated that many third-party vendors found it too difficult to make their products interoperable with Teams, thus making third-party products less attractive to enterprises.
Microsoft has committed to creating new support resources “to better organize” and direct developers to public APIs for Microsoft 365. This, the blog notes, will include support to address questions from customers and independent software vendors (ISVs).
3. Third-party support
The final concession is a promise to create new mechanisms that will enable third-party solutions to host Office web applications within competing apps and services.
“We appreciate the clarity that has emerged on several of the concerns from extensive and constructive discussions with the European Commission. With the benefit of this clarity, we believe it is important that we start to take meaningful steps to address those concerns," wrote Linde. “We believe these changes balance the interests of our competitors with those of European business customers, providing them with access to the best possible solutions at competitive prices."
New Teams Pricing Problems
The European Commission cannot comment on Microsoft's offer due to the ongoing investigation. However, an issue already has been raised with the new pricing that will likely cause concern among enterprises considering a new subscription with Microsoft.
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A review of the pricing details provided show that while existing customers can choose to either remain on their current plan, or drop Teams, at a reduction of €2 per user/per month, which will quickly add up given this option is only open to enterprises, new subscribers aren't so lucky.
New customers would sign up for the now unbundled Microsoft 365 as their base offering, but would have to pay an extra €5 per month if they want Teams, which would effectively increase the price of the subscription by €3 per user/month.
Finally, those on small business plans, or frontline worker plans, have no option to subscribe to the standalone Teams offering, which will effectively force them to stick with their existing plan or do without completely.
It is impossible to know how the European Commission will react to this, but if this is the final offer, it seems unlikely to sway the legislative body.
Microsoft is clearly feeling the regulatory pressure here and time will tell if it follows with further concessions. Over the past 10 years, it has racked up fines of $2.4 billion in antitrust cases in the EU. While this is small change for companies like Microsoft, it demonstrates the EU's willingness to act and force changes in practices that it considers detrimental to European citizens.
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