Yesterday Slack (NYSE: WORK) accused Microsoft (NASDAQ: MSFT) of anti-competitive practices in EU courts by bundling Teams, its workplace chat software, within its Office 365 subscription for no extra cost. In doing so, Microsoft is, illegally according to this claim, gaining a competitive edge and posing ‘an existential threat to Slack’. CEO Stewart Butterfield took to Twitter (NYSE: TWTR) to relay his thoughts on the case in an incredibly insightful if somewhat petulant series of Tweets. While I suggest reading them yourself, a few tidbits include a comparison to Instagram’s adoption of stories to deter users from trying Snapchat (NYSE: SNAP), as well as calling Teams’ “UX clunky and slow”.
Some notes about https://t.co/ii0SDULm7v, since it got a lot of ?.— Stewart Butterfield (@stewart) July 22, 2020
Over 3+ years since Teams was announced, we’ve grown >500% (our enterprise business grew >1,100%). We continue to win with the biggest companies in the world. We've lost 0% of our 100 largest customers … ?/n
This case is particularly salivating for two reasons. The first is that Butterfield must descend from his pedestal and admit that it has actually been in competition with the lowly Microsoft all this time. He famously said “Teams is not a competitor to Slack’ only a few months ago. The second is the fact that Microsoft has been clawed back into the murky depths of Big Tech antitrust cases in the same week the leaders of the other 4 horsemen of Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB) and Apple (NASDAQ: AAPL) are to appear in front of The House Judiciary Antitrust Subcommittee. You don’t get to a trillion dollars without playing in the mud it seems.
Precedence is the name of the game
While such a title was considered unprofessional in my constitutional law elective back in the day, it seems quite fitting here. In the ’90s, Microsoft’s dominance over the personal computing space led to it finding itself in the crosshairs of both the Federal Trade Commission and the Department of Justice a few times. The most memorable case against them came from the DoJ and attorneys general of 20 states, who claimed the bundling of additional programs into its operating system constituted monopolistic actions. In particular, Microsoft adding Internet Explorer to all of its operating systems in a bid to oust the then search browser of choice Netscape. Sound familiar?
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Microsoft lost the case and was ordered to split the company in two. However, the ruling was mired in controversy and Microsoft won an appeal to overturn the judge’s decision. The company eventually settled with the DoJ and deprived us of the decision of whether we wanted to invest in Micro or Soft.
Whether Slack can take heed from one of the most famous antitrust cases in history is up for debate, although one can’t deny the striking similarities between the two. However, investors and analysts alike reacted coolly to the news of the case with Slack’s stock dropping 5% yesterday. Mizuho Securities analyst Gregg Moskowitz said, “We would be surprised to see WORK initiate a formal complaint in the U.S., which in our view would have a very low likelihood of success”.
The outcome of the case will be of particular interest to Zoom (NASDAQ: ZM) whose trailblazing video conferencing software is under threat from similar bundling efforts by both Microsoft and Google’s office suites. If successful could this lead to a wave of smaller competitors taking a swing at the heavyweights? Will we see Shopify (NYSE: SHOP) and Pinterest (NYSE: PINS) take on Amazon and Facebook? Or perhaps the big travel companies like Expedia (NASDAQ: EXPE) and Booking.com (NASDAQ: BKNG) will be inspired to bring a case against Google’s use of its search engine dominance to wrest away their market share.
The future is unclear, but this case might go some way to putting a dent in the infallibility which has surrounded big tech companies for so long.
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Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.