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EU's Antitrust Charges Against Microsoft
The European Union continues to turn up the heat on US tech giants. European regulators recently hit Microsoft (MSFT) with an antitrust charge, just a day after charging Apple (AAPL) with violating European Union competition law. The European Commission (EC), the EU’s antitrust authority, informed Microsoft of its view that the tech giant had been illegally bundling — or "tying" — its Teams software to other proprietary business software, including Office 365 and Microsoft 365.
Tying software applications together, according to the EC, violates the Treaty on the Functioning of the European Union (TFEU), which prohibits abuse of dominant market positions. Fines for such violations can run up to 10% of a company’s worldwide annual revenue. For Microsoft, global revenue in 2023 totaled $212 billion.
Microsoft president Brad Smith stated that the company has already untethered Teams from some of its other software products. "We appreciate the additional clarity provided today and will work to find solutions to address the commission‘s remaining concerns," he said.
As of the latest trading session, Microsoft Corporation (MSFT) saw its stock close at $450.95, marking a 0.73% increase. However, after-hours trading showed a slight decline to $450.81.
Apple's Compliance with EU Regulations
The EC also targeted Apple, informing the iPhone maker that the rules for its lucrative App Store violated the EU’s recently enacted Digital Markets Act (DMA) by illegally blocking software developers from telling customers how to access content outside the store. Apple defended its practices, stating, "We are confident our plan complies with the law."
These actions are the latest examples of the EU making life more challenging for tech businesses worldwide. The 27-nation bloc has aggressively adopted new laws to police personal data, social media content, and the dominance of Big Tech. It has blocked mergers and readied comprehensive legislation to police artificial intelligence.
Historical Context and Future Implications
The EU, established in 1993, has a long history of moving more aggressively in its regulation of businesses than the US. It has chalked up some early victories, such as in 2001, when its antitrust stance doomed a $42 billion proposed merger between GE and Honeywell, despite approval in the US. In 2007, it adopted broad environmental legislation pushing chemical companies worldwide to adhere to new restrictions.
In recent years, the EU's attempts to rein in tech giants have intensified. The General Data Protection Regulation (GDPR), implemented in 2018, was designed to protect consumer privacy and security, imposing obligations on companies globally that target or collect data related to people in the EU. Subsequent laws like the Digital Markets Act and Digital Services Act aim to curb the dominance of Big Tech companies like Apple, Amazon (AMZN), Meta (META), and Microsoft, and regulate content on major online platforms.
The charges against Microsoft and Apple are detailed in separate legal filings, or statements of objection, outlining the EC’s investigative evidence and justifications for its claims. In the case of Microsoft, the EC asserted that the company’s practices might have granted Teams a distribution advantage because customers had no choice about acquiring access to Teams when subscribing to the company’s software productivity applications.
The commission noted that Microsoft imposed interoperability limitations on competing software with Teams, potentially preventing competition, stifling innovation, and disadvantaging consumers. Complaints over Microsoft’s software bundles originated back in 2020 when Salesforce-owned Slack, a business software competitor, claimed the company was abusing its market power.
Following the EC’s investigations, Microsoft in October 2023 untethered Teams from some of its other software products. The change was applied globally in April. Microsoft will now have the opportunity to present its own evidence in response to the objections before the EC issues a final decision on whether or not the bloc’s antitrust laws were breached. The EC’s final determinations are handled through administrative proceedings without a trial, but appeals can be made to the European Court of Justice.
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