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Microsoft to Separate Teams from Office Suite to Avoid EU Fine

Microsoft has announced plans to unbundle its chat and video app Teams from the Office product in an attempt to avoid a potential EU antitrust fine, though rivals suggest that more needs to be done.

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Microsoft logo

Response to Regulatory Concerns

Microsoft (NASDAQ: MSFT) announced that it would separate its chat and video app, Teams, from its Office product and make its software more compatible with competing products. However, rivals argue that Microsoft may need to take further actions to prevent a potential EU antitrust fine. This announcement comes a month after the European Commission started an investigation into Microsoft's combination of Office and Teams, following a complaint by Salesforce-owned competitor Slack in 2020.

Preliminary Concessions and EU Response

The changes proposed by Microsoft resemble initial concessions that failed to address regulatory concerns. The EU competition enforcer noted the company's announcement but declined to comment further. Sources familiar with the matter informed Reuters last month that the Commission might bring formal charges against Microsoft in the autumn unless the company enhances its offer.

History and Popularity of Teams

Microsoft added Teams to Office 365 for free in 2017, eventually replacing Skype for Business and gaining popularity during the pandemic due to its video conferencing capabilities.

Microsoft's Proactive Changes

Microsoft's vice president for European government affairs, Nanna-Louise Linde (NYSE: LIN), stated in a blog post that the company is making proactive changes to address EU concerns while cooperating with the ongoing European Commission investigation. Linde mentioned that the changes aim to address two EU concerns: allowing customers to choose a business suite without Teams at a lower price and making it easier for rival communication and collaboration solutions to interoperate with Microsoft 365 and Office 365 suites.

Implementation and New Support Resources

The changes, which will be effective from October 1, will apply in the EU and Switzerland. Microsoft's core enterprise customers in Europe will have the option to switch to a version of Office that excludes Teams at a price of 2 euros per month cheaper than with Teams included. New enterprise customers can purchase Teams separately for 5 euros per month. Microsoft will also introduce new support resources for customers and independent software vendors who wish to remove data from Teams and use it in another product. Additionally, Microsoft will develop a new method for hosting Office web applications within competing apps and services, similar to what it does with Teams.

Response from Salesforce and Rivals

Salesforce (NYSE: CRM), the owner of Slack, stated that it had nothing to add to the announcement. However, rivals argue that Microsoft's current offer would be unlikely to satisfy the EU antitrust watchdog. An industry source commented that the offer does not include anything incremental and that the Commission would probably not appreciate it.

High Stakes for Microsoft

The stakes are high for the U.S. tech giant, which has incurred 2.2 billion euros ($2.40 billion) in EU antitrust fines over the past decade for tying or bundling two or more products together. Since then, Microsoft has sought a more conciliatory approach with regulators.