Earlier this month, Quinn Emanuel’s antitrust team filed a formal complaint on behalf of Slack Technologies to the European Commission’s Competition Directorate alleging that Microsoft is abusing its dominant position in enterprise software to attempt to stymie what third party analysts have described as an “existential threat” to Microsoft’s business posed by Slack in violation of EU competition law, as set out in Article 102 of the Treaty on the Functioning of the European Union (TFEU).
Over the past few years, Slack has emerged as the leading channel-based messaging platform and gateway to cloud work for millions of business users. Like Zoom and Microsoft Teams, Slack has recently experienced enormous increased demand because of the coronavirus-induced shutdowns that have forced millions to work from home. It features an open gateway approach that allows developers to write apps that run on Slack in contrast to Microsoft’s closed “gatekeeper” approach. Slack has often been described as an “email killer” which threatens Microsoft’s Outlook, its dominant email client which is the cornerstone of its dominant Office productivity suite (which includes Outlook, Word, Excel and PowerPoint). Slack also threatens Microsoft’s hold on the highly profitable enterprise software market, because Slack’s open platform allows users to seamlessly access thousands of cloud based best-in-breed applications, as well as creating their own custom integrations.
The Complaint alleges that Microsoft deliberately copied Slack when it designed its competing Teams collaboration product and that it is currently taking a series of actions targeted at Slack to undermine it and foreclose competition. Specifically, the Complaint alleges that Microsoft illegally ties Teams into Office, force installs Teams for millions of users, blocks its removal, hides the true cost to enterprise customers and refuses to provide necessary interoperability information.
Commentators have noted that the current dispute echoes the internet browser wars in the 1990s between Microsoft and Netscape Communications, the commercial pioneer of browser software, which lead to a landmark federal antitrust case against Microsoft in the United States. Since then, Microsoft has largely avoided the same intense antitrust scrutiny that other tech giants have undergone.
Now, online cloud software is the major platform, and Teams is included in Microsoft’s Office 365/Microsoft 365 cloud suite. In reporting on this case, The New York Times quoted Michael Cusumano, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, who emphasized the growing importance of online collaboration platforms stating: “[o]nline collaboration platforms and related tools have become as important to us as smartphones and computers.”
As Slack noted in its press release, “this is much bigger than Slack versus Microsoft – this is a proxy for two very different philosophies for the future of digital ecosystems, gateways versus gatekeepers. Slack offers an open flexible approach that compounds the threat to Microsoft because it is a gateway to innovative best-in-class technology that competes with the rest of Microsoft’s stack and gives customers the freedom to build solutions that meet their needs.”
The Complaint requests that the European Commission impose remedies on Microsoft which would, amongst other things require it to (i) untie Teams from Exchange, Sharepoint, Office, Office 365/Microsoft 365 by removing it from all of its Office 365/Microsoft 365 packages, (ii) ensure that customers can only purchase Teams on a stand-alone basis, (iii) remedy the situation with regard to existing users of Office 365/Microsoft 365, (iv) stop the auto-installation of Teams to Office 365/Microsoft 365 users; (v) provide all necessary interoperability information, and (vi) cease providing unlawful financial incentives.
The European Commission will now review the complaint and decide whether to open a formal investigation into Microsoft’s anti-competitive practices. Slack has not yet taken any similar action in the United States but is having conversations with the relevant authorities and has not ruled out actions in the U.S.
Quinn Emanuel invites other Software as a Service or Infrastructure as a Service companies, especially application developers who benefit from Slack’s open platform and wish to support the Complaint or who may have other issues which need to be dealt with, to contact the firm at the following confidential email address: MicrosoftAntitrust@quinnemanuel.com