If there is a delivery failure after acceptance of a message, the
   receiver-SMTP MUST formulate and mail a notification message.  This
   notification MUST be sent using a null ("<>") reverse-path in the
   envelope.  The recipient of this notification MUST be the address
   from the envelope return path (or the Return-Path: line).

   As discussed in Section 7.8 and Section 7.9 below, dropping mail
   without notification of the sender is permitted in practice.
   However, it is extremely dangerous and violates a long tradition and
   community expectations that mail is either delivered or returned. If
    silent message-dropping is misused, it could easily undermine
   confidence in the reliability of the Internet's mail systems.  So
   silent dropping of messages should be considered only in those cases
   where there is very high confidence that the messages are seriously
   fraudulent or otherwise inappropriate.

The RFC makes clear the long-standing principle that a mail-server operator is entitled to make his own rules as to what mail he is and isn't willing to accept. But he's NOT allowed to accept it for delivery, and then silently discard it.

Hotmail was always awful for this. There are comments up-thread to the effect that Microsoft might be trying to squeeze out self-hosted mailservers. I suspect that was the case in the Hotmail days. Either it worked, and nobody self-hosts any more (FALSE) or it didn't work, and they should have given up. I suspect the same policies are still in place due to corporate inertia.