Microsoft (MSFT) Might Face EU Probe Over 2020 Slack Complaint
Microsoft's MSFT Office suite might face an anti-trust investigation from the European Union (EU) in the coming months.
The EU is concerned that Microsoft is using its dominant position in the productivity software market to push its cloud services to customers, making it difficult for them to switch to other providers.
The investigation is the result of a complaint filed by Salesforce CRM-owned Slack in 2020. Slack alleged that Microsoft's bundling of Teams with Office gives the company an unfair advantage in the market for collaboration software.
Microsoft added Teams to Office 365 in 2017 for free, with the app eventually replacing Skype for Business.
Slack alleged that its rival had unfairly integrated workplace chat and video app Teams into its Office product. It urged the regulator to force Microsoft to remove Teams from its Microsoft 365 suite and offer it separately at fair commercial prices.
Microsoft initiated talks with the European Commission (EC) last year to avoid an investigation. As part of its proposed solution, MSFT recently offered to reduce the price of its Office product by excluding the Teams app. However, the EC is reportedly seeking a more substantial price reduction from the tech giant.
Microsoft Corporation Price and Consensus
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
Mounting Pressure on Microsoft's Cloud Business Practices
The EU has fined the software giant more than 2.2 billion euros in the previous decade for breaching competition rules, including by bundling various products together, such as integrating its own browsers or media players into Windows.
The EU is also reportedly worried about Microsoft's data collection practices and whether it comply with the privacy regulations, such as the General Data Protection Regulation.
In May, the European Commission opened an investigation into Microsoft's Azure cloud business. The probe comes amid rising concerns that the U.S. tech giant is leveraging its market power to edge out rivals.
The EC's investigation is focused on whether Microsoft is using its dominant position in the operating system market to give its Azure cloud business an unfair advantage. The probe also investigates if MSFT is using its relationships with large customers to lock them into its Azure cloud platform.
German cloud provider, Nextcloud, has also filed a complaint with the EU about the bundling of OneDrive with Windows. There are also concerns from other cloud providers, both local European shops and global rivals, about the cost of running Microsoft software in their own clouds.
Microsoft settled a joint complaint brought by OVHcloud, DCD and Aruba S.p.a in March, although the contents were confidential and there is no intent to make them public, prompting critics to complain over the parties' lack of transparency.
Zacks Rank & Stocks to Consider
Microsoft, which currently carries Zacks Rank #3 (Hold), has gained 40.9% of its share price in the year-to-date period compared with the Zacks Computer & Technology Sector’s rise of 37.2%.
Some better-ranked stocks from the broader technology sector are AvidXchange AVDX and Baidu BIDU. AvidXchange and Baidu carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of AvidXchange have risen 4.4% in the year-to-date period. The long-term earnings growth rate for AVDX is currently projected at 5.7%.
Shares of Baidu have gained 19.7% in the year-to-date period. Its long-term earnings growth rate is presently projected at 19.5%.
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