Microsoft hit with EU antitrust charge over Teams app, risks hefty fine

By Foo Yun Chee

BRUSSELS (Reuters) -Microsoft faces a hefty antitrust fine after the European Commission on Tuesday accused it of illegally linking its chat and video app Teams with its Office product, giving it an unfair advantage over rivals such as Slack.

Two decades after Microsoft's last EU fine, the EU competition watchdog's latest action was triggered by a 2020 complaint from rival workspace messaging app Slack, owned by Salesforce.

Reuters first reported in April that the EU was preparing the charges.

The European Commission, which acts as the EU competition watchdog, said Teams had been given a distribution advantage while limitations preventing interaction between Teams' competitors and Microsoft's offerings further hindered rivals.

"Preserving competition for remote communication and collaboration tools is essential as it also fosters innovation on these markets," EU antitrust chief Margrethe Vestager said in a statement.

The U.S. tech giant had to pay 2.2 billion euros ($2.4 billion) in EU antitrust fines two decades ago for tying, or bundling, two or more products together and other offences. It risks a fine of as much as 10% of its global annual turnover if it is found guilty of latest alleged antitrust breaches.

The Commission said action Microsoft had taken did not sufficiently address its concerns and that more changes were necessary to restore competition.

The EU enforcer wants the company to sell Office without Teams at a lower price than what it has announced, people with direct knowledge of the matter said, while rivals want clearer interoperability terms and more incentives for users to switch to them.

Microsoft President Brad Smith reiterated comments made earlier this month about the company's willingness to resolve the issue.

"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," Smith said.

Salesforce President and Chief Legal Officer Sabastian Niles urged the Commission to move towards a swift, binding and effective remedy to restore a free and fair choice.

German rival and complainant Alfaview also welcomed the Commission's charge against Microsoft.

Teams was added to Office 365 in 2017 for free and it subsequently replaced Skype for Business. Its popularity soared during the pandemic due in part to its video conferencing but rivals said bundling the products together gave Microsoft an unfair advantage.

Microsoft in April separated Teams from Office globally to try to resolve EU antitrust concerns and also made it easier for rivals to function with its products but sources said the unbundling was unlikely to appease regulators.

($1 = 0.9321 euros)

(Reporting by Foo Yun Chee; editing by Barbara Lewis)