EU Commission's Teams antitrust ruling threatens to result in higher prices for EU-based users

Yesterday (June 25, 2024), the European Commission announced a Statement of Objections (SO), which is a preliminary antitrust ruling, against the way 微软 distributes its Teams video conferencing software. Complainants Slack ( Salesforce ) and alfaview? Video Conferencing Systems are unsurprisingly jubilant. But what about customers?

I use Teams, Zoom and Google Meets. For many years, I was a Slack customer (and used video conferencing only once if I recall correctly; it's a text chat system). I use OpenOffice on my PC, and Google Workspace online, instead of Microsoft Office. The EC's announcement appears counterproductive to me. Instead of leveling the playing field to bring down prices and spur innovation, it looks like a regulator putting its thumb on the scales in ways that will increase costs and distort competition.

This is the perspective of a technology user with a strong interest in competition enforcement. Microsoft supports one of my websites ( ai fray ; disclosure), but that does not stop me from commenting objectively on patent cases against Microsoft (1, 2, 3), expressing doubts about a contempt proceeding in which Microsoft filed an amicus curiae brief or discussing the deletion of files by their partner and co-defendant OpenAI .

What the EC has achieved: Teams got unbundled

As a user and customer, I actually have to thank the Commission for what it has achieved so far: Teams is available as a standalone offering, and at a reasonable price (€3.70 per user per month).

I don't need it urgently (yet). Usually I get invited to video conferences and then use Teams for free in my browser (Chrome). I rarely create a Teams meeting. But at some point I was considering paying for it, and such a situation could arise again. I didn't like the fact that I'd have had to pay not only for Teams but also for what used to be called Microsoft Office. I use OpenOffice. People who are familiar with it would have recognized some of the clip art I used in some charts and slides that I published.

The EC's concern is that Microsoft would leverage its market power in office applications to license Teams. In my case, it would have worked the other way round. But not anymore because Microsoft, as a result of the EU inquiry, made Teams available on a standalone basis, and even worldwide.

This is not a position on whether there was an antitrust issue. I just wanted to say thank you as someone who would be more likely to pay for Teams than for all the other Microsoft 365 apps, provided that Teams is reasonably priced.

What could go wrong now: higher prices

If the EC had dropped the investigation on the current basis, I would have viewed the outcome as "net positive" for users. Now, however, the EC's press release has me concerned:

After the Commission opened proceedings in July 2023, Microsoft introduced changes in the way it distributes Teams. In particular, Microsoft started offering some suites without Teams. The Commission preliminarily finds that these changes are insufficient to address its concerns and that more changes to Microsoft's conduct are necessary to restore competition.

What does "more changes" mean? Microsoft's core enterprise offerings are available without Teams. That's where the largest part of the volume is. The other thing that the EC apparently wants is that the price differential between Microsoft 365 with Teams and Microsoft 365 without Teams should be greater. Conversely, that means Teams should be made more expensive!

That is not in my interest. I can see why Microsoft's competitors would like that. But what about users like me? I have to pay for Microsoft stuff just like everyone else. The last time I got a Microsoft software product for free was in the 1990s when I was on a conference panel with someone from Microsoft and received one of their infotainment products on a CD-ROM.

It's hard to imagine an objective point of reference here. Whatever Zoom's or Alfaview's or Slack's pricing strategy may be is not necessarily the right price for Teams. That leads to the next point: what about Google?

Google Workspace & Google Meets

I have a Google Workspace subscription. I could use certain standard productivity apps, but I actually don't. For me it's about GMail (and, to a limited extent, Google Drive).

Google Workspace comes with Google Meets. Would it make sense to impose a price hike on Microsoft while Google gets away with giving away Google Meets?

I've used Google Meets a few times as well. Less frequently than Teams and Zoom, but I have used it repeatedly. I like it.

The EC obligated Microsoft to offer "browser choice" in a window, and this just accelerated the trend toward a Chrome monoculture. Chrome has been my preferred browser pretty much ever since it was released. But antitrust enforcement should not trade in one (alleged) monopoly for another.

Tying must have boundaries

The EC's press release accuses Microsoft of "tying Teams with its core SaaS productivity applications" (meaning some other components of Microsoft 365, formerly known as Office 365). But what the EC then talks about (such as a distribution advantage) sounds more like bundling — a term that does not occur in the press release.

In 2009, the EC released a guidance paper on antitrust enforcement (PDF) that explained the difference as follows:

‘Tying’ usually refers to situations where customers that purchase one product (the tying product) are required also to purchase another product from the dominant undertaking (the tied product). Tying can take place on a technical or contractual basis (2). ‘Bundling’ usually refers to the way products are offered and priced by the dominant undertaking. In the case of pure bundling the products are only sold jointly in fixed proportions. In the case of mixed bundling, often referred to as a multi-product rebate, the products are also made available separately, but the sum of the prices when sold separately is higher than the bundled price.

The last sentence of that passage suggests that there should be no discount for buying multiple products in a package. But up to a certain point, it is definitely in the interest of customers to have such options. It's a means of saving money.

Tying is the theory that competition enforcers can develop against someone abusing market power (which the EC claims Microsoft to have in a proposed market of "SaaS [software as a service] productivity applications for professional use") in one field in order to sell products for which there would otherwise not be so much demand, or to command prices or impose other contractual terms in another field. Buyers wouldn't want those product or accept those prices or other terms if they didn't depend on that company in the field in which it is dominant.

A 2004 paper that is still available in an online archive on the website of the U.S. Department of Justice (DOJ) explains that tying cannot reasonably be per se illegal. It depends.

If Microsoft used the market power that its Microsoft 365 offering allegedly possesses in order to force everyone to overpay for Teams, or to impose some onerous non-monetary terms, then there would be a potential tying issue. But what the Commission is criticizing here, now that Microsoft actually unbundled Teams, sounds more like a bundling concern: a concern over the ability of others to compete on price.

In a market in which Google Meets definitely competes on price (it's free for Workspace subscribers like me), and in which various video conferencing products (such as Zoom and Teams) can be used up to a certain point without paying, there is no point in forcing Microsoft to make Teams and, by extension, some multi-app offerings more expensive.

The EC should try not to protect competitors to an extent that goes beyond what is needed to safeguard the competitive process.

Interoperability

The EC talks about interoperability restrictions, while Microsoft actually prides itself on enabling far-reaching interoperability. I can't take a position on that at this stage. I'd have to know a lot more about what the EC would like Microsoft to do in that regard. It could be a solution in search of a problem.

If and when more information becomes available, I may write a follow-up to this piece.