The European Union's investigation into Microsoft's bundling of Teams and Office 365 has just begun, but it's already behind the ball and likely won't lead to a substantial impact on the tech giant.
Slack Technologies, which is owned by Salesforce and makes a communication app that competes with Teams, filed a complaint against Microsoft in July 2020. Slack alleged that Microsoft illegally tied Teams to its dominant Office 365 productivity suite. Building off the complaint, the EU raised concerns that Microsoft is abusing its market position in productivity software by restricting competition in communication products.
The EU investigation comes as Salesforce attempts to justify its $27.7 billion acquisition of Slack in 2021, said Alan Pelz-Sharpe, founder of market research firm Deep Analysis. The concerns about Microsoft's practices stem from competing vendors such as Salesforce and Slack rather than enterprise businesses using the products, given that Microsoft is in a dominant market position, he said.
"Filling gaps or serving parallel services to Microsoft's desktop and productivity apps has generated an industry," Pelz-Sharpe said. "Still, over time, Microsoft fills those gaps and adds services, effectively freezing out the competition."
Though the EU's investigation isn't without merit, Pelz-Sharpe said the EU might struggle to make a case against Microsoft because it's acting too late.
Alan Pelz-SharpeFounder, Deep Analysis
"In the case of Microsoft, I would argue it's a bit too late -- the horse has already bolted," he said. "As such, any fines or restrictions will be appealed, and even if followed through will have little impact on Microsoft's business."
Building a monopoly case proves difficult
Determining that a tying and bundling action harms competition generally means plaintiffs need to consider a few main factors, said Diana Moss, president of the American Antitrust Institute.
Plaintiffs need to demonstrate that a company possesses a monopoly position and then uses that position to leverage market power from one market to another, causing harm such as restricting competition and raising prices for consumers. Moss said those factors set a high bar, which is why not many monopolization cases advance.
As an example, the EU recently investigated Microsoft's planned acquisition of video game company Activision Blizzard, but eventually approved the deal earlier this year. The U.S. Federal Trade Commission (FTC) also pursued Microsoft on the deal before eventually dropping it, demonstrating how difficult it is to prove that adding such assets is anti-competitive, Moss said. That's why the FTC likely won't follow in the EU's footsteps by opening an investigation into Microsoft's bundling of Teams with Office 365, she said.
"It's the same ecosystem concept of adding in these assets that are complementary to existing assets and how could market power be leveraged from one to the other," Moss said. "This is the name of the game with tech companies because of the way they're structured with platforms, cloud technology and applications throughout their system."
Even if the EU pursues Microsoft's bundling of Office 365 and Teams beyond the initial investigation, its impact on the company is questionable considering the EU's history of settling with companies on behavioral or conduct remedies rather than forging ahead with more disruptive structural remedies, such as breaking up a company.
Moss said it's "potentially troubling" given the track record of the ineffectiveness of conduct remedies, which are rules and stipulations companies agree to follow to eliminate competition concerns.
"They're obviously very concerned about digital technology," Moss said. "But what you see with the Europeans is a willingness to accept conduct remedies to settle a lot of these competitive concerns."
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.