Microsoft Seeks to Ease EU Antitrust Concerns With Office Pricing Adjustment

In an effort to address European Union antitrust concerns, Microsoft has proposed a wider price gap between its Office suite bundled with Teams and its version sold without the chat and video application, according to sources cited by Reuters. The move comes as the tech giant attempts to avoid potential regulatory penalties from the European Commission.

The controversy surrounding Microsoft’s bundling practices dates back to 2019 when Salesforce-owned Slack lodged a complaint with the EU, arguing that tying Teams to Office created an unfair competitive advantage. More recently, in 2023, German company alfaview filed a similar grievance, adding to regulatory scrutiny. Teams, initially introduced as a free addition to Office 365 in 2017, eventually replaced Skype for Business and gained widespread adoption, particularly during the COVID-19 pandemic when video conferencing saw a surge in demand.

Per Reuters, Microsoft previously sought to ease concerns by unbundling Teams from Office in 2023, offering a version without Teams for 2 euros less than the bundled package, while selling the standalone Teams app for 5 euros per month. However, EU regulators have continued to investigate whether these measures sufficiently address competition concerns.

To further mitigate regulatory scrutiny, Microsoft has now proposed increasing the price difference between Office with and without Teams, potentially giving competitors a better chance to attract customers with alternative solutions. Additionally, sources told Reuters that Microsoft has offered improved interoperability terms, making it easier for rival companies to integrate their products and compete more effectively.

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Despite Microsoft’s efforts, the European Commission has yet to make a formal decision on whether the latest proposal is adequate. According to Reuters, the Commission has sought feedback from various companies, with responses due this week. Depending on the outcome, regulators may proceed with a formal market test to assess the effectiveness of Microsoft’s concessions.

The stakes are significant, as Microsoft has faced substantial fines from the EU in the past. Over the last two decades, the company has incurred penalties totaling 2.2 billion euros ($2.3 billion) for bundling-related antitrust violations. EU competition authorities have the power to impose fines of up to 10% of a company’s global annual revenue if they find evidence of anticompetitive practices.

According to Reuters, should the European Commission accept Microsoft’s proposal without imposing a fine or a ruling of misconduct, it would allow regulators to allocate more resources to ongoing investigations into other tech giants, such as Apple and Google. Both the EU watchdog and Microsoft declined to comment on the matter.

Source: Reuters