Please ensure Javascript is enabled for purposes of website accessibility

Slack Accuses Microsoft of Illegally Undermining Competition With Teams Bundling

By Evan Niu, CFA – Jul 23, 2020 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's precedent that bundling can sometimes violate antitrust laws.

Bundling can be remarkably powerful strategy, maybe even too powerful in some cases. That strategy is at the heart of a formal antitrust complaint filed in the European Union by Slack (WORK), alleging that Microsoft (MSFT -1.01%) is violating competition laws by including Teams in its ubiquitous Office suite. Microsoft has become Slack's biggest competitor amid the latter platform's skyrocketing popularity in recent years, which has only accelerated during the COVID-19 pandemic.

The complaint is also eerily reminiscent of similar past skirmishes among tech companies.

Slack app interface on Mac

Image source: Slack.

Bundling Teams in Office

Slack CEO Stewart Butterfield has dismissed the competitive threat posed by Microsoft on numerous occasions since Slack went public. "There's still a lot of people choosing Slack, despite the fact that they have Teams bundled in for free," Butterfield said late last year.

"We're confident that we win on the merits of our product, but we can't ignore illegal behavior that deprives customers of access to the tools and solutions they want," Slack communications and policy exec Jonathan Prince said in a statement. "Slack threatens Microsoft's hold on business email, the cornerstone of Office, which means Slack threatens Microsoft's lock on enterprise software."

Teams is included with Office and oftentimes launches when a work PC is booted up, which Slack has previously argued has the effect of inflating Teams users and other engagement metrics. The upstart challenger alleges that Office customers can't remove Teams and the strategy hides "the true cost to enterprise customers."

History repeats itself

If this all sounds somewhat familiar, that's because Microsoft used a similar tactic in the late '90s as internet browsers were emerging as one of the most critical software applications for users. Back then, Microsoft leveraged the dominance of Windows to bundle Internet Explorer in an effort to undermine Netscape Navigator.

Microsoft famously lost one of the biggest antitrust cases in U.S. history over the browser wars, before getting slapped with a $730 million fine by the European Commission over a decade later for a similar practice that the company blamed on a technical error. This history is not lost on Slack.

"Microsoft is reverting to past behavior," Slack General Counsel David Schellhase added. "They created a weak, copycat product and tied it to their dominant Office product, force installing it and blocking its removal, a carbon copy of their illegal behavior during the 'browser wars.'"

Separately, Alphabet (GOOG -1.26%) (GOOGL -1.01%) subsidiary Google was hit with a massive $5 billion fine in 2018 over bundling its own services in with Android. In addition to pre-installing its own apps, the search giant allegedly used the Google Play store as leverage in order to prevent smartphone manufacturers from making smartphones running modified ("forked") versions of Android.

In other words, there is some precedent that extreme bundling strategies can in some cases violate antitrust laws when used by dominant companies. The ball is now in the European Commission's court to see if Microsoft has crossed any legal lines...again.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Microsoft, and Slack Technologies and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.
WORK
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$235.06 (-1.01%) $-2.39
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$97.18 (-1.01%) $0.99
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$97.57 (-1.26%) $-1.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.