Microsoft offered on May 16 to sell its Office 365 and Microsoft 365 software suites from its Teams workplace communication app at a lower price. The tech firm said it wants to manage competition concerns from European regulators by enhancing interoperability for rival services.
The executive arm of the European Union acknowledged on Friday that the company made commitments to address concerns over tying Teams to its widely used productivity tools, such as Word and Outlook.
The Commission also noted that Microsoft has decided that if the commitments are made binding, it will align its worldwide suite offers and pricing with them.
Microsoft offers to sell Office without Teams to address regulatory concerns
Under the new concessions, the tech firm agreed to allow customers to switch to Office 365 and Microsoft 365 tools without Teams, including under existing contracts. The firm would also allow such suites to be deployed in data centers worldwide.
The company also offered Teams’ competitors increased interoperability with other Microsoft products and services for specific functionalities. The tech firm would also embed Office Web Applications, including Word, Excel, and PowerPoint, in its own products and integrate its products into Microsoft’s core productivity applications.
Another proposal included allowing customers to move their data out of Teams to facilitate the use of competing solutions.
“The proposed commitments are the result of constructive, good-faith discussions with the European Commission over several months. We believe that they represent a clear and complete resolution to the concerns raised by our competitors and will provide European customers with more choices.”
–Nanna-Louise Linde, Vice President of European Government Affairs at Microsoft.
Sabastian Niles, Salesforce’s president and chief legal officer, mentioned that the European Commission’s announcement Friday affirmed that Microsoft’s anticompetitive practices with Teams have harmed competition. He said the company required a binding, enforceable, and effective remedy and promised to scrutinize Microsoft’s proposed commitments.
The EU noted that the commitments would remain in force for seven years, except for interoperability and data portability obligations, which would remain in force for ten years. The Commission also said the implementation of the commitments would be monitored by a monitoring trustee, who will also mediate in case of disputes between third parties and Microsoft.
The EU revealed it sought feedback from rivals and customers before deciding whether to accept the offer. The Commission launched its probe into Microsoft after a 2020 complaint by Slack, now owned by Salesforce, alleging that the tech firm unfairly tied Teams to its widely used productivity software, limiting competition.
If the tech company fails to honor its commitments, the Commission said it could impose a fine of up to 10% of its worldwide turnover without proving an infringement of EU antitrust rules.
European Union probes Microsoft for alleged breach of competition rules
The Commission opened a formal investigation in July 2023 to assess whether Microsoft’s conduct concerning the distribution of Teams violates EU competition rules. It found that Microsoft is dominant worldwide in the market for Software-as-a-Service (SaaS) productivity applications for professional use.
The EU also found that the tech firm has been tying Teams with its core SaaS productivity applications since 2019.
The Commission discovered that the company had breached Article 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition. The EU also identified the company as having breached Article 54 of the Agreement on the European Economic Area.
Microsoft began selling Office without Teams in Europe last year, but the regulators argued the initial changes were insufficient and that more changes to the company’s conduct were necessary to restore competition effectively.
The Commission also invited all interested parties to submit their views on the tech firm’s proposed commitments within one month of publication. The Commission added that the full report of the commitments will be available on its competition website.
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