Soft (NYSE: WORK) recently filed an antitrust complaint against Microsoft (NASDAQ: MSFT) in the European Union, claiming that Microsoft’s strategy of consolidating Teams into Office 365 is anti-competitive.

In a blog post, Slack claims that Microsoft “illegally linked its Teams product to its market-dominant Office productivity suite, forced it to install it for millions, blocking its removal and hiding the true cost to them. client companies “. Jonathan Prince, vice president of communications and policy at Slack, said the company “cannot ignore illegal behavior that denies customers access to the tools and solutions they want.”

Slack general counsel David Schellhase insisted the company “just wants fair competition and a level playing field,” called Teams a “weak and imitated product,” and accused Microsoft of illegally exploit “its market-to-market power” with its software bundles. Schellhase also said Slack was having similar conversations with U.S. antitrust regulators during a press call, although no formal complaints have yet been filed.

Slack’s decision against Microsoft is not surprising since the tech giant was not shy on his plans to beat Slack. But it also contradicts Slack CEO Stewart Butterfield’s claim that Microsoft was “not a competitor” in an interview with CNBC earlier this year.

So, is Slack admitting defeat by filing antitrust complaints against Microsoft?

Slack officially considers Microsoft to be its main competitor

Slack’s management often rejects the idea that it is in direct competition with Microsoft, but it still calls Microsoft its “main competitor” in its latest 10-Q case.

In the filing, Slack admits that Microsoft has “significantly broader product offerings” and exploits those relationships “in a way that discourages users from buying Slack.” He says Microsoft can offer teams “zero or negative margins,” bundle it with other services, and use forced product migrations, installations and “closed technology platforms” to gain users.

Image source: Slack.

Slack says Microsoft’s “particularly aggressive” strategies have “caused some potential customers not to buy Slack,” and admits that the competition “has and may continue to hurt our business.”

In a series of follow-up tweets, Butterfield said Teams was “given away for free” in Office 365 bundles and that Skype for Business users were “forcibly migrated” to Teams. He noted that these packs and upgrades were “impossible to avoid” and “enabled by default”.

In the Slack blog post, Schellhase called the strategy of Microsoft’s teams a “carbon copy of their illegal behavior during the browser wars” two decades ago, in which Microsoft was pilloried by antitrust regulators for have combined Internet Explorer with Windows in order to gain market share over competing web browsers.

Slack continues to grow – for now

Slack’s warnings sound terrible, but its platform still growing. Its revenue grew 50% per year in the last quarter, its billings increased 38% and the number of paying customers increased 28% to 122,000.

The value of these customers is also increasing. Its number of paying customers generating more than $ 100,000 in annual recurring revenue has grown 49% per year and its net dollar retention rate has reached 132%, indicating that it is not only retaining its existing customers, but generates more revenue per customer. He still expects his revenue to grow 36% to 38% for the full year.

However, Slack is still not profitable and its losses are growing. This makes it difficult for Slack to survive a protracted war against Microsoft, which is firmly profitable, generates most of its revenue from other companies and can continue to offer Teams for free at “zero or negative margins.”

Microsoft claimed Teams surpassed 75 million Daily Active Users (DAUs) in April, up from 44 million in March, as the COVID-19 crisis forced more people to work from home. It did not update that number of users in its recent third quarter report.

Slack doesn’t regularly update its user count, but it did reveal that it had 12 million DAUs last October and 12.5 million concurrent users in March. Therefore, Slack is likely to still achieve lower DAUs than Teams, and this gap could widen as Microsoft aggressively promotes Teams to Office 365 users.

Is Slack admitting defeat with its antitrust allegations?

I don’t view Slack’s antitrust complaints against Microsoft as an admission of defeat because its platform is still growing and retain users. However, Slack admits it might find it difficult to outlast Microsoft – which reportedly tried to buy Slack for $ 8 billion four years ago – in the long run.

On the bright side, if Slack’s complaints trigger antitrust action against Microsoft and force it to dissociate Teams from Office 365, the headwinds of competition could subside and ignite a fire under its stock.