Microsoft’s Teams Bundling: What EU’s Crackdown Means for Tech & Education

“At a political level, it is of particular importance to advocate for the preservation of democratic structures and prevent billion-dollar publicly owned tech corporations from dominating market and society’s consumer behavior globally.”

Niko Fostiropoulos, Founder and Managing Director of alfaview

Microsoft’s decision to bundle its Teams collaboration tool with the Office 365 suite has ignited significant debate about its competitive practices, particularly in Europe. German-based video conferencing platform alfaview has filed antitrust complaints, accusing Microsoft of stifling innovation and eliminating competition by including Teams at no additional cost within its dominant Office package. Similar concerns have been raised in other sectors, including education, where Microsoft’s handling of personal data in its 365 Education suite has also come under scrutiny.

At the heart of these complaints is a pressing question: Does Microsoft’s dominance in the productivity software market give it an unfair advantage in adjacent sectors, like video conferencing and collaboration tools? As regulators and competitors push for stricter enforcement of antitrust laws, this case could set a precedent for how technology giants manage market power and competition. We spoke with an expert involved in the space to learn more about the impact to business, privacy rights and market competition

Niko Fostiropoulos was born in Greece in 1958 and now lives in Karlsruhe, Germany. He is the founder and managing director of several companies in Germany.

After studying architecture at the University of Karlsruhe, which is now the Karlsruhe Institute of Technology (KIT), he founded the alfatraining training company in 2005, which now has over 300 locations in Germany and a site in Thessaloniki, Greece, and employs more than 400 people. As the world’s first training provider, alfatraining has been running its courses entirely via the in-house developed alfaview video conferencing software since 2010. The development of alfaview was necessary because, at that time, no standard video conferencing software was available on the market anywhere in the world with which 20, 50, or more people could communicate audiovisually at the same time.

From 2016, alfaview was commercially marketed as a SaaS product in response to requests from SAP and other companies. In the following years, Fostiropoulos acquired and founded other companies operating under the alfa Group umbrella, including EML Speech Technology, a company specializing in intelligent AI-based speech recognition and transcription. The company provides products for digital real-time translation, for use in call centers, and in the field of air traffic control.

Fostiropoulos was already committed to socio-political issues while studying architecture. Democratic and socio-political values, education in particular, and the use of digital technologies for the benefit of civil society shaped his time as a student.

Even after graduating, he remained interested in politics and was elected to the Karlsruhe City Council from 1999 to 2019.

Today, he is focusing on the development of AI-based software that enables accessible video communication—without distance barriers and, above all, accessible for people with disabilities to promote inclusion.

Microsoft’s decision to integrate Teams into its widely used Office 365 suite has fundamentally altered the video conferencing and collaboration market. Initially launched as a standalone tool, Teams quickly gained traction due to its seamless integration with Microsoft’s other productivity applications, such as Word, Excel, and Outlook. This bundling strategy allowed Microsoft to offer Teams as part of an existing package, ensuring it became instantly accessible to millions of businesses and educational institutions that were already reliant on Office products.

This strategy proved successful—particularly during the Covid-19 pandemic, when remote work and virtual meetings became essential. Businesses, faced with the need to maintain operations remotely, gravitated toward Teams, which was already integrated into their familiar Office environment. The convenience of bundling video conferencing and collaboration tools within a comprehensive suite of productivity apps negated the need to evaluate alternative solutions.

However, this bundling practice has come under fire from competitors. Critics argue that by bundling Teams with Office, Microsoft is leveraging its dominance in one market to gain an unassailable advantage in another. Since many users receive Teams as part of their Office subscription, they have little incentive to explore other options, even if competing products like alfaview offer better features or performance.

Niko Fostiropoulos, CEO of alfaview, underscores the competitive challenges this presents saying, “By tying Teams to the Office suite, Microsoft has created an unassailable reach and competitive advantage in breach of antitrust law, unfairly extending its dominant position in the market for productivity software into the separate market for video conferencing tools.”

Alfaview, a video conferencing software company that started developing its in-house solution in 2010, has been particularly outspoken in its criticism of Microsoft. Launched commercially in 2016, alfaview had early success, securing major clients like SAP. However, the company contends that Microsoft’s bundling of Teams with Office 365 has made it nearly impossible for competitors to gain a foothold in the market.

Alfaview argues that by providing Teams as part of the Office suite, Microsoft effectively eliminates competition in the video conferencing space.

Fostiropoulos explains, “Microsoft Office users no longer decide for or against a particular video conferencing service based on quality and relevance, but automatically use Teams, which is supposedly supplied free of charge.”

One of alfaview’s primary demands is the complete decoupling of Teams from Office 365. The company argues that this would allow users to make informed choices about which video conferencing tools best meet their needs. Additionally, alfaview calls for transparent pricing for Teams, claiming that Microsoft’s current practice of cross-financing Teams through its Office suite distorts competition. They assert that without financial transparency, competitors cannot price their products fairly, as they cannot subsidize costs through other services.

Alfaview also highlights the need for interoperability. Microsoft Office users currently benefit from Teams’ seamless integration, which gives it a substantial advantage over competing products.

Fostiropoulos stresses the importance of a level playing field, sharing, “For fair competition, it is necessary that all competitors on the market are given the same technical opportunities to make their services interoperable with Office.”

Lastly, there is criticism of Microsoft’s marketing approach, arguing that the automatic inclusion of Teams in Office packages puts competitors at a disadvantage. Microsoft can deliver Teams to its vast customer base without additional advertising costs, while smaller competitors like alfaview must spend heavily on marketing to gain visibility. This creates an uneven playing field, further reinforcing Microsoft’s dominant position in both productivity software and video conferencing tools.

The European Union has consistently taken a firm stance on antitrust issues, particularly when it comes to major technology companies using market dominance to suppress competition. In Microsoft’s case, the integration of Teams into Office 365 has raised serious concerns about whether the company is violating competition laws that are designed to ensure fair and open markets.

The EU’s antitrust laws, specifically Article 102 of the Treaty on the Functioning of the European Union (TFEU), prohibit companies with dominant market positions from engaging in practices that harm competition. Bundling itself isn’t necessarily illegal, but when a company uses its dominance in one area to unfairly expand into another, the practice becomes problematic. Microsoft’s integration of Teams with Office could be seen as a direct violation of these laws, as it effectively blocks competitors from accessing the market on equal terms.

The EU’s concern is not only about protecting competitors but also about safeguarding consumer welfare. Reduced competition can limit consumer choice, slow innovation, and lead to less market diversity. In the case of Microsoft, the overwhelming presence of Office 365, combined with the bundling of Teams, could result in fewer options for consumers and businesses in the video conferencing space.

The case could set a significant precedent if the EU decides that Microsoft’s actions breach antitrust regulations. This could force Microsoft—and other technology giants—to reconsider how they package and sell their products across different sectors. It may also prompt a broader examination of how companies leverage dominant positions in core markets to expand into adjacent ones, influencing the entire technology landscape.

Under increasing regulatory pressure, Microsoft has taken steps to address concerns about its bundling practices. In August 2023, the company announced a partial unbundling of Teams from Office 365 in the European Economic Area and Switzerland. However, critics like Fostiropoulos argue that this move was insufficient, calling it “a token gesture rather than a meaningful step toward ensuring fair competition.”

The unbundling applies primarily to the Enterprise version of Office 365, leaving the majority of users—particularly small and medium-sized businesses—still receiving Teams as part of their Office subscriptions. Additionally, the price reduction for Office 365 packages that exclude Teams was only €2 per license, a figure that many view as trivial, offering little incentive for businesses to seek alternative video conferencing tools.

Fostiropoulos explains this approach’s shortcomings. He says, “Microsoft’s minimal discount does not create sufficient incentives to switch to another fee-based video conferencing service. The alleged decoupling remains largely ineffective.”

The lack of incentives leaves the competitive landscape unchanged for many businesses still bound to Microsoft’s bundled services.

The unbundling also fails to address the deeper issue of cross-financing. As long as Microsoft can offset the cost of Teams through its more profitable Office products, competitors without similar revenue streams will continue to struggle to offer comparable services at competitive prices. Many argue that until Microsoft fully decouples Teams from Office and adopts transparent pricing that reflects the actual cost of the service, true competition will remain out of reach.

Microsoft’s bundling of Teams has reshaped competition in the video conferencing market, particularly in Europe, where regulators are more vigilant. The widespread adoption of Office 365 among businesses means that Teams benefits from the same near-ubiquitous presence, making it difficult for competitors to gain visibility and market share.

Fostiropoulos reiterates the difficulty for competitors. “Innovative and powerful products can no longer compete on the market because Microsoft has a dominant position in the area of PC operating systems as well as office applications,” he states. “Tying it with the other applications in the Microsoft Office 365 suite creates an enormous distribution advantage.”

For businesses already using Office, switching to another video conferencing tool would require additional investment, both financially and in terms of employee training. The convenience and perceived “free” nature of Teams often outweigh any technical or performance advantages that alternative products may offer. As a result, companies like alfaview, Zoom, and others face a significant uphill battle in attracting new users.

Globally, the impact is even more pronounced. In regions where competition laws are less stringent, Microsoft’s bundling practices face fewer regulatory challenges, allowing the company to further consolidate its position. This dynamic limits the growth potential for competitors, who struggle to differentiate their products in a market increasingly dominated by a single player.

The implications for innovation are equally concerning. A lack of competition can lead to stagnation, as dominant players have less incentive to innovate or improve their products. In fast-moving industries like video conferencing, where technological advancements are crucial, reduced competition could slow the pace of innovation, leaving consumers with fewer options and potentially outdated solutions.

While Microsoft’s bundling of Teams has raised antitrust concerns, the company is also facing legal challenges in other sectors, particularly in education. Advocacy group NOYB (None of Your Business) has filed complaints against Microsoft in Austria, claiming that the company’s 365 Education suite violates the EU’s General Data Protection Regulation (GDPR). The group argues that Microsoft shifts the responsibility for managing students’ personal data onto schools, many of which are ill-equipped to handle such sensitive information.

This complaint ties into broader concerns about Microsoft’s market dominance in the education sector. Just as with video conferencing, Microsoft’s bundling of its education tools, including Teams, into its 365 suite makes it difficult for competing products to gain traction. Schools, often working with limited budgets, are inclined to adopt Microsoft’s tools due to their low cost, effectively sidelining other solutions.

“At a political level, it is of particular importance to advocate for the preservation of democratic structures and prevent billion-dollar publicly owned tech corporations from dominating market and society’s consumer behavior globally,” Fostiropoulos explains on how this issue extends beyond antitrust.

To restore fair competition, many believe more robust regulatory action is needed. Critics argue that Microsoft’s current steps—such as the limited unbundling of Teams—are largely superficial. For true competition to flourish, several key changes are necessary.

First, full decoupling of Teams from Office 365 is essential. Only by separating the two can video conferencing tools compete on equal footing. Transparent pricing for Teams is equally important. Microsoft’s ability to subsidize Teams through its Office revenue distorts the market, making it difficult for smaller players to compete.

“Teams as a product must be priced transparently along real costs. Cross-financing via other products in Microsoft’s range is anti-competitive under the EU competition rules,” explains Fostiropoulos. Without transparent pricing, smaller companies are left at a disadvantage.

Additionally, Microsoft’s dominance in both the operating system and office applications markets has created what Fostiropoulos calls a “multipolar distribution advantage” for Teams. This reach, amplified by the bundling, gives Teams an unprecedented head start that competitors simply cannot overcome through merit-based competition alone. According to Fostiropoulos, this means that “innovative and powerful products can no longer position themselves in the market with any long-term success. ”

Interoperability is another critical aspect. Microsoft Office users benefit from Teams’ seamless integration, but alternative products often face technical challenges when trying to work within the same ecosystem. “It’s vital that all market participants, like alfaview, are given the same technical opportunities for interoperability with Office,” argues Fostiropoulos. Without this level playing field, companies like alfaview struggle to compete fairly.

Lastly, regulators must enforce stricter rules on how bundled services are marketed. Microsoft’s ability to deliver Teams to existing Office users without additional marketing or sales costs places an unfair burden on competitors.

“Microsoft can make their product available to their customers without having to spend on marketing and sales, while we, as competitors, must bear significant costs to introduce our software into the market,” Fostiropoulos emphasizes.

Offering clear, equivalent booking options for Office 365 with and without Teams, alongside advertising highlighting the distinction, would allow competitors to gain visibility and provide consumers with a genuine choice.

Fostiropoulos concludes that ensuring compliance with competitive legal conditions is key to fostering a healthy innovation landscape. “Only through preventing monopolies can we enable and promote the worldwide development of technically advanced alternatives,” he asserts.

As the Microsoft Teams bundling case unfolds, the implications for the broader tech industry are significant. Should regulators take decisive action, it could set a precedent that limits how tech giants leverage market power across multiple sectors. This would encourage innovation and create a more competitive environment where smaller companies have the opportunity to succeed.

However, if Microsoft’s current unbundling measures are deemed sufficient, other large technology companies may be emboldened to continue similar practices, further concentrating power and limiting consumer choice. The outcome of this case will not only shape the future of video conferencing and collaboration tools but could also influence how tech companies bundle services and capture markets in the years to come.