New Risks in Bundling Applications

A recent EU ruling may have implications for software providers everywhere. Microsoft was found to have violated EU antitrust laws by the European Commission in a preliminary finding announced at the end of June. The investigation was spawned by a 2020 complaint filed by Slack alleging that the bundling of Teams with the MS Office suite at no extra cost denied Slack an opportunity to compete on a level playing field in the messaging & collaboration space.

Of course, this is just the latest example of a long-standing pattern at Microsoft. Consider the incorporation of the Microsoft browser within the Office suite used to defeat Netscape all the way back in the 90’s.

The remedy for such infringements is to offer an unbundled option that allows customers to purchase the dominant suite (Office in this case) without the added app (in this case Teams). This would allow customers to separately license an alternative app to accompany the core suite (e.g. Slack). There are also integration barriers that must be overcome, but Microsoft has already unbundled Teams by offering a version of Office without it and is working on the integration issue for the EU market.

INSIGHTS: The broad implications of this case on other software products are what’s worth noting here. First, the EU tends to set precedent for regulation efforts that cascade to the US and other markets, so anticipate such regulation coming soon to a market near you. Second, such restrictions would seem to create a more open path for focused product offerings that might complement established suites like Microsoft’s or Adobe’s or vertical market offerings. This may create new opportunities for app developers through an environment of more vigorous competition.

But third, this preliminary ruling is also a warning that extends even to industry-focused enterprise suites that they should be judicious about incorporating new apps at no additional cost to customers. Ask the question: are there competitors for the app you want to create and add for free? Just how should we go about bundling new capabilities?

That might be time for a legal opinion.

Bill Haines, Partner