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How Slack could reshape the entire Big Tech antitrust debate in the U.S.

The outcome of Slack’s antitrust action against Microsoft and Teams may send shock waves through antitrust probes against Big Tech in the United States.

How Slack could reshape the entire Big Tech antitrust debate in the U.S.
[Photo: Austin Distel/Unsplash]

The House Judiciary Committee may now wish it had invited Microsoft CEO Satya Nadella to join Apple’s Tim Cook, Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, and Google’s Sundar Pichai at its upcoming hearing on antitrust. Microsoft, after all, was the defendant in perhaps the biggest antitrust case against a tech company in the last half-century, during the “browser wars” of the 1990s and 2000s. And now the company may be set to relive the whole thing after Slack complained to the European Commission about how Microsoft markets its Teams collaboration product.

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Slack says Microsoft is bundling Teams with its Office subscription suite in order to keep businesses from trying Slack by presenting Teams as a viable, and ostensibly free, alternative (the Office subscription product was formerly known as Office 365 and recently renamed Microsoft 365).

“Microsoft is reverting to past behavior,” says Slack general counsel David Schellhase in a statement. “It 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.'”

In the 1990s and 2000s, regulators in the U.S. and Europe punished Microsoft for bundling its Internet Explorer browser with its market-leading Windows operating system in order to freeze out the superior Netscape browser. Then, too, regulators accused Microsoft of hiding the real cost of Internet Explorer within the cost of the Windows operating system.

Microsoft says Teams is beating Slack on its merits.

“We created Teams to combine the ability to collaborate with the ability to connect via video, because that’s what people want,” the company said in an emailed statement. “With COVID-19, the market has embraced Teams in record numbers while Slack suffered from its absence of video-conferencing. We’re committed to offering customers not only the best of new innovation, but a wide variety of choice in how they purchase and use the product.” Slack does offer a videoconferencing function, but it’s designed only for company-internal huddles.

During the browser-war years, Microsoft was shown to have given Explorer an unfair advantage via Windows’ market power, but the penalties were so soft (in the U.S.) and temporary (in Europe) that Explorer became the browser used by the vast majority of PC users.

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Microsoft’s bundling strategy worked then, and at least for now, it appears to be working in an enterprise messaging platform battle with Slack. At the end of April, Microsoft said Teams had 75 million daily active users, up from 44 million in mid-March. In the last quarter, business sales of Microsoft 365 increased 19%—solidifying Office software as a growth business for Microsoft.

In contrast, Slack has stopped reporting daily active users (perhaps out of a reluctance to compare poorly with Teams). The last time it reported its daily active users was last October, when they numbered about 12 million.

If European regulators are sympathetic to Slack’s argument, the case is likely to migrate to the U.S., which most of the biggest and most influential tech companies call home. And the reckoning over tech and antitrust that’s already brewing in the nation’s capital may come to a boil over a dispute between two players that have so far scarcely been mentioned in the debate.

Apples versus oranges?

Despite filing an antitrust complaint, Slack CEO Stewart Butterfield has said his product doesn’t even really compete with Teams. Slack is mainly an asynchronous channel-based messaging platform. Butterfield sees Teams as mainly a videoconferencing platform, more akin to Zoom, BlueJeans, or GoToMeeting.

“The reality is Slack loses out not having a videoconferencing solution, and Teams loses out by only having chat that works best chatting while you are on a video meeting,” says Creative Strategies analyst Ben Bajarin. (Slack introduced an internal videoconferencing system in 2016, but it’s not at the same level of maturity as Zoom or Teams.)

Microsoft seems to be investing most of its development resources into improving the videoconferencing part of Teams, such as the recent addition of a “Together” mode that makes videoconference attendees appear in a virtual auditorium.

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So if Slack doesn’t compete directly with Teams, then why is Slack filing a complaint about Teams?

So if Slack doesn’t compete directly with Teams, then why is Slack filing a complaint about Teams?

As Slack sees it, the dispute is about more than just the two products. Microsoft is trying to sell a “suite” of products, while Slack is trying to sell a messaging platform that integrates with an ecosystem of other productivity software, some of which compete with various parts of the Microsoft 365 suite—for instance, Google Docs and Zoom. (Microsoft is also part of that ecosystem: It has apps for Slack that let you do some Outlook emailing and calendaring within a channel.)

Slack’s VP of communications and policy Jonathan Prince tells me his company believes Microsoft is presenting Teams as a comparable product to Slack, and bundling it with Microsoft 365 so that it seems free, in an attempt to keep businesses from taking a serious look at Slack. If Slack finds its way in the door of a Microsoft shop, it could mean trouble for Microsoft. The more time a business’s employees spend inside Slack and the tools it integrates with, the less essential Microsoft’s products may seem, and the harder it may be to keep customers paying for them.

Prince says Microsoft has yet to add features that Slack already has, like the ability to scale up to hundreds of thousands of users per team in large organizations (Teams is limited to 10,000), or unlimited channels for teams, or the ability to securely link in people from other organizations, as through the Slack Connect feature. He says Microsoft is bundling Teams with Microsoft 365 to buy it time to add the features it needs to be a truly comparable solution to Slack.

Microsoft didn’t offer an interview for this story.

Prince says Microsoft took the same tack to buy time while it added features to Internet Explorer to bring it to parity with Netscape back in the day. Before the browser wars, it followed the same strategy to help Word defeat WordPerfect and to help Excel beat Lotus 1-2-3, both of which are a large part of how Office became dominant in the first place.

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Calling Brussels

Slack faces the same challenges competing with Microsoft and Teams in the U.S. as it does in Europe, but it had good reason to file its complaint with the European Commission. European courts’ interpretation of competition law has evolved on a different track than U.S. courts—they’re more sympathetic to arguments that consumers are harmed when companies such as Microsoft use their largess to promote their own products and freeze out alternatives. U.S. courts are more likely to take into account ways the alleged anticompetitive behavior might improve the product or service in question.

In legal terms, the differences between the two doctrines are complex. I asked antitrust litigator Tina Sessions of Keker, Van Nest & Peters in Washington, D.C., to explain it in general terms. “In the U.S., an enforcer [like the FTC or DOJ] or a private plaintiff really needs to prove that the challenged practice has a detrimental effect on competition, and that those effects outweigh the benefit of the practice,” she explains. So, in the Slack case, a U.S. court might weigh the harm to competition caused by Microsoft’s bundling of Teams against the functional benefits of the tight integration of Teams with other Microsoft 365 apps. (One of those functional benefits might be the ability for a team to work together on a Word or Excel doc within Teams.)

“Whereas in Europe the courts have given a lot less credence to the benefits of the practice that the defendant puts forward,” Sessions says. In Europe, a plaintiff such as Slack might prevail by proving that consumers are harmed by a lack of competition, while the functional benefits of the bundling weigh less in the analysis.

William Kovacic, professor of law and policy at George Washington University School of Law. [Photo: courtesy of George Washington University]
In that legal environment, European regulators are more willing to pursue antitrust cases against big companies than U.S. regulators. In a recent example, the commission announced in June that it has opened an investigation into Apple’s App Store and Apple Pay practices. The commission has also fined Google a total of $9.3 billion in three separate antitrust actions since 2017 and is contemplating a full-scale probe into the privacy implications of Google’s proposed acquisition of Fitbit.

It’s also true that the European Commission has more, and more recent, experience with Microsoft and antitrust than U.S. regulators, points out George Washington Law School professor and antitrust expert William Kovacic.

“When [the commission] prosecuted Microsoft in the 2000s, theories involving tying and bundling were important to their case,” says Kovacic, who was chairman of the Federal Trade Commission in 2008 and 2009. Those cases have contributed to the evolution of European antitrust case law, he adds.

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“So if you’re Slack and you’re thinking, ‘Where do I go?,’ then Brussels is a more compatible venue than Washington,” Kovacic says.

What happens next?

The European Commission will now decide whether or not to commence an investigation into Microsoft’s marketing of Teams. The best-case scenario for Slack would be for the commission to decide that Microsoft had violated antitrust law and order the company to unbundle Teams so that it competes head-to-head in the open market in Europe. It may also do something less drastic, such as require Microsoft to make Teams optional to all Microsoft 365 buyers, or require Microsoft to put a price on the Teams app within the bundle.

So if you’re Slack and you’re thinking, ‘Where do I go?,’ then Brussels is a more compatible venue than Washington.”

William Kovacic

If Slack gets any kind of positive result in Europe, there’s a good chance it could decide to make a formal complaint to the FTC or DOJ. In fact, Slack’s attorneys are in dialogue with U.S. regulators, who are already asking questions, if informally, about the case.

In one sense, a Slack victory in Europe may have its own reward, even outside Europe.

Tina Sessions, partner at Keker, Van Nest & Peters in San Francisco. [Photo: courtesy of Keker, Van Nest & Peters]
“If Slack is successful in getting the commission to launch an investigation into Microsoft and possibly get some enforcement action, that’s going to have the same effect on Microsoft as it would have if U.S. enforcers decided to take a look at this,” says antitrust litigator Sessions.

That’s because it’s very expensive for a tech company to operate and monitor two different business models in two different major world markets, she explains. For example, it may be costly for Microsoft to sell Teams unbundled from Microsoft 365 to European customers while continuing to bundle Teams with the productivity suite for U.S. customers, Sessions says. Not that Microsoft hasn’t done this before: After Microsoft lost its European antitrust case in 2009, it offered a special version of Windows in Europe that let people pick one of 12 browsers as their default while keeping Internet Explorer as the default in the U.S.

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A shift in posture

The European Commission’s decision to investigate Slack’s complaint against Microsoft may reverberate far beyond the businesses of the two companies. It may end up playing a big role in the future direction of U.S. antitrust law, which has already begun to shift over the past few years.

Beginning in the late 1970s, U.S. courts have interpreted antitrust law in a way that has narrowed the definition of antitrust liability, making it tougher for plaintiffs to win cases. Some of this narrowing has happened as a result of decisions in the high court. “In the last 40 years, the dominant theme of the Supreme Court cases has been a desire to preserve incentives for big firms to compete,” Kovacic says.

With some notable exceptions—the U.S. vs. Microsoft in 2001, and the FTC’s 1998 and 2009 actions against Intel—both regulators and private companies have been hesitant to bring antitrust actions to U.S. courts because of the high risk of losing. When regulators such as the FTC and DOJ begin to routinely lose cases, they risk losing their deterrent power, Kovacic tells me. When big companies stop believing regulators can harm them, they’re emboldened to test the limits of anticompetitive behavior.

On the other hand, U.S. regulators are under increasing pressure to bring antitrust cases against big companies, especially big tech companies. “One theme that’s been developing . . . is that the U.S. has been too timid,” Kovacic says. “There’s been a lack of imagination and a lack of courage.”

Much of the pressure on regulators has come from the House antitrust subcommittee, led by Representative David Cicilline (a Democrat from Rhode Island). The subcommittee has held five public hearings to understand the antitrust implications of Big Tech’s business models and practices. It’s also questioned the leadership of the FTC and DOJ antitrust divisions to understand why regulators bring cases (or don’t). The House Judiciary Committee—the one that will question the CEOs of Amazon, Apple, Facebook, and Google this week—has announced its own investigations and has submitted hundreds of information and documentation requests to those companies, and to more than 80 smaller tech companies that may have been harmed by them.

In times of economic uncertainty . . . there’s an increased interest in antitrust enforcement.”

Tina Sessions

Add to this the high-profile calls from people such as Elizabeth Warren to break up big tech companies on antitrust grounds, a sentiment that’s played well with constituents outside the tech bubbles of the coasts.

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“In times of economic uncertainty, in times where income disparity becomes a hot issue . . . there’s an increased interest in antitrust enforcement,” Sessions tells me. “In a time when we’re concerned about tech companies getting very big—when it used to be the old U.S. Steel and things like that—I think people look to the antitrust laws to try to fix these problems.”

All this has already influenced the posture of the DOJ and FTC with regard to Big Tech. The FTC said last summer it had opened an investigation into the business practices and models of Facebook and Amazon, while the DOJ is reportedly looking into the business practices and acquisitions of Google, Facebook, and possibly Apple. These investigations are at various stages within different agencies and are occurring at a number of different speeds.

Such investigations have sometimes gone nowhere in the past. But Kovacic and Sessions both say the DOJ and FTC’s current work, and the work of a number of state attorneys general, seem to be headed toward some action.

“I do think they will bring cases,” Kovacic says. “I don’t think they can stand in front of a press conference some months from now and say, ‘Never mind.'”

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About the author

Fast Company Senior Writer Mark Sullivan covers emerging technology, politics, artificial intelligence, large tech companies, and misinformation. An award-winning San Francisco-based journalist, Sullivan's work has appeared in Wired, Al Jazeera, CNN, ABC News, CNET, and many others.

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