Slack Accuses Microsoft of Illegally Crushing Competition – The New York Times - Freelance Rack

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Wednesday, July 22, 2020

Slack Accuses Microsoft of Illegally Crushing Competition – The New York Times

Microsoft is undeniably one of the Big Tech elite, given its size, wealth and stock market value. But the software giant has stood apart from Google, Facebook, Amazon and Apple in one important respect: Microsoft, once the bully of the tech world, has escaped antitrust scrutiny so far.

Now Slack Technologies, whose popular chat and collaboration software has become embedded in the daily routines of millions of workers at thousands of companies, is hoping to change that.

Slack said on Wednesday that it had filed a complaint against Microsoft with the European Commission, accusing the tech giant of using its market power to try to crush the upstart rival.

Slack claims that Microsoft has illegally tied its collaboration software, Microsoft Teams, to its dominant suite of productivity programs, Microsoft Office, which includes Outlook, Word, Excel and PowerPoint. That bundling tactic, Slack contends, is part of a pattern of anticompetitive behavior by Microsoft.

“Slack threatens Microsoft’s hold on business email, the cornerstone of Office, which means Slack threatens Microsoft’s lock on enterprise software,” Jonathan Prince, vice president of communications and policy at Slack, said in a statement.

Slack’s complaint is just a first step. The European Commission must decide if a formal investigation is warranted. In recent years, European regulators have more aggressively pursued antitrust actions against large tech companies than American officials.

Federal and state regulators in the United States are investigating whether the other tech giants have broken antitrust laws. On Monday, the chief executives of Apple, Amazon, Alphabet (which owns Google) and Facebook will testify before Congress, which is also looking into them.

Under European rules, the Slack complaint is not made public. But in a news conference, David Schellhase, Slack’s general counsel, said the company sought an order to remove Teams from Office, make it a stand-alone product and charge a “fair price.”

In a statement, Microsoft said, “We created Teams to combine the ability to collaborate with the ability to connect via video,” noting that Slack lacks video conferencing.

Microsoft, the statement added, is “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.” And the company said it looked forward to “providing additional information to the European Commission and answering any questions they may have.”

The Slack-Microsoft confrontation has some echoes of the internet browser competition in the 1990s. The browser wars led to a landmark federal antitrust case against Microsoft in the United States that found the company repeatedly violated the nation’s antitrust laws. Europe also ruled against Microsoft.

The internet browser was a layer of software that could be a gateway to online computing. Developers could write software applications that ran on the browser, potentially undermining the role of Microsoft’s Windows operating system, the dominant technology of the personal computer era.

The browser was a rival computing platform. And Netscape Communications, the commercial pioneer of browser software, was Microsoft’s enemy.

Today, Slack serves as a gateway to online work for many people. Developers can write apps that run on Slack. And it is a nascent challenge to one part of Microsoft’s business. Now, online cloud software is the major platform, and Teams is included in Microsoft’s Office 365 cloud suite.

“Online collaboration platforms and related tools have become as important to us as smartphones and computers,” said Michael Cusumano, a professor at the Sloan School of Management at the Massachusetts Institute of Technology.

ImageThe Slack-Microsoft confrontation echoes the internet browser competition of the 1990s.
Credit…Jeenah Moon for The New York Times

Whether a software program like Slack could emerge as a genuine business threat to Microsoft is uncertain, industry analysts say. Microsoft has positioned Teams as an all-in-one stop for online video meetings, calls, chat and collaboration, and it works seamlessly with Microsoft’s Office software.

“For Microsoft, Teams is increasingly where online work is done,” said Wayne Kurtzman, an analyst at IDC, a technology research firm. “It is becoming a platform for Microsoft.”

Slack is making its complaint as adoption of collaboration technology is surging. Slack, Microsoft Teams and Zoom are all experiencing huge demand because of the coronavirus-induced shutdowns that have forced much of the work force to toil from home.

In April, when the company reported its quarterly financial results, Microsoft said Teams had 75 million daily users, more than double the number in early March. At the time, Satya Nadella, Microsoft’s chief executive, said, “We’ve seen two years’ worth of digital transformation in two months.”

Microsoft will report its results for the most recent quarter on Wednesday, after the close of stock trading. Despite the coronavirus-battered economy, Microsoft is expected to report revenue of $36.5 billion, up 8 percent, according analysts estimates compiled by IBES Refinitiv.

Slack, which was founded in 2014, has enjoyed rapid growth this year. Last month, reporting the results for its quarter ended in April, Slack said its revenue had jumped 50 percent to $202 million. It has more than 122,000 paying customers, typically companies with annual licenses, which was a 28 percent increase from the year-earlier quarter.

Mr. Schellhase, the Slack general counsel, said, “Microsoft is reverting to past behavior.”

But the illegal-tying claim, which Slack makes in its complaint, was not resolved in the federal browser case. Microsoft was found to have engaged in a range of illegal tactics to thwart competition, with contract restrictions and threats. An appeals court upheld those claims but sent the tying claim back to the lower court for reconsideration. The case, which was brought by the Clinton administration, was settled early in the Bush administration.

Slack contends that bundling Teams with Office is “clearly a violation of European law,” said Mr. Prince, the company’s vice president for policy.

Google announced last week that it was more tightly integrating video, chat and email into its GSuite bundle of products. But the difference, Slack says, is that Google is not a dominant company in business software, as Microsoft is.



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