From: allin
Microsoft has faced accusations and charges related to antitrust violations, particularly concerning its practice of bundling various software products together [01:03:26]. This strategy, often referred to as Microsoft’s “not-so-secret weapon,” has been used to dominate new markets [01:04:03].
EU Antitrust Charges Over Teams Bundling
The European Union recently charged Microsoft with antitrust violations for bundling its communication platform, Teams, into its Office suite [01:03:26]. This practice led to a significant increase in Teams’ user base, with 75 million members in 2022 compared to Slack’s 12 million [01:03:44].
The core of the complaint, supported by Salesforce, is that Microsoft Office is a product that virtually every enterprise needs [01:05:22]. By bundling Teams with Office, the messaging product appears “free” to the customer, even though the price of the overall bundle may increase later [01:05:32]. This makes it challenging for competitors like Slack, which charge for seats, to compete effectively [01:05:55].
The “Dumping” Analogy
Critics argue that this bundling tactic is akin to “dumping,” where a company sells a product below cost (or appears to give it away for free) to eliminate competition [01:07:13]. Once competitors are driven out of business, the dominant company can then raise prices [01:07:07].
Historical Context of Bundling Practices
Microsoft has a long history of bundling products to suppress competitors, a strategy employed for 40 years [01:08:14]. A notable example is the bundling of Internet Explorer with Microsoft Windows, which effectively “killed” Netscape [01:08:37]. For a decade, under Steve Ballmer’s leadership, Microsoft was prevented from engaging in such practices due to a consent decree with the U.S. Justice Department [01:08:19].
The Executives at Microsoft, with decades of experience, are familiar with this “Playbook” and its success in public markets [01:09:01]. The sale of Slack to Salesforce, a $27 billion acquisition, is cited as a direct consequence of this bundling pressure, as Slack found itself on a “melting iceberg” [01:09:05].
Calls for Regulatory Action
There is a call for the U.S. Federal Trade Commission (FTC) and Department of Justice (DOJ) to review the old consent decree, as EU regulators appear to be more proactive in addressing these issues [01:09:40]. The argument is that preventing anti-competitive tactics like bundling is a more effective antitrust approach than stifling mergers and acquisitions (M&A) [01:10:00].
The Debate: Consumer Benefit vs. Fair Competition
There is a debate about whether bundling always harms the consumer. Some argue that if bundling leads to improved prices and benefits the customer, it should be acceptable [01:11:18]. An analogy is made to supermarkets using “loss leaders” like milk and eggs to attract customers, eventually making profit on other items [01:11:39].
However, critics distinguish between bundling commodities and bundling a product where the company holds a monopoly, like Microsoft Office [01:11:53]. In the latter case, the bundled product (e.g., Teams) appears free, making it difficult for competing standalone products to gain traction [01:12:02].
The long-term concern is that such strategies can “starve the market of choice” and limit the ability of new, innovative companies, especially venture-funded startups, to compete effectively [01:15:20]. This could lead to a market dominated by a few large companies with “product sprawl” rather than a healthy, open, and competitive environment [01:15:57]. The solution proposed is to enforce “a la carte” pricing for all products, ensuring customers have true discretion and fostering a more level playing field [01:13:56].