Microsoft could be Big Tech’s next antitrust target

Over the past several years, Microsoft has largely managed to weather populist calls to break up big tech companies while its peers have faced sweeping lawsuits. But the Federal Trade Commission’s investigation suggests that grace period may be coming to an end.

Earlier this year, Bloomberg shown The contents of civil investigative orders (CIDs) — similar to a subpoena — that the FTC sent to at least six companies that compete with Microsoft. New details obtained Edge It reveals more about the FTC’s interests, suggesting that the agency is particularly concerned with potentially exclusionary conduct around Microsoft’s Azure cloud services, as well as its role in the artificial intelligence industry.

There is no guarantee that an investigation has been initiated Under the Biden administration In 2024 and continued Under President Donald Trump – It will end in a legal complaint. After further investigative steps, FTC staff will choose whether to recommend filing one, and the agency’s two commissioners will vote. But if they agree to sue, Microsoft could find itself back in the hot seat it occupied more than two decades ago, when a court found it had an illegal monopoly on the personal computer operating system.

Edge I obtained previously unreported information about the messages from an industry source who reviewed them and was granted anonymity to speak about non-public information. Edge Further document verification. The questions show that the FTC collects information about industry practices and competitive obstacles, and asks about Microsoft’s business agreements, licensing arrangements, and the interoperability of its products. Documents generally span more than 15 pages and more than 15 questions, and often contain extensive subsections.

The goal of the FTC investigation is to determine whether Microsoft used unfair competition tactics in its cloud and software products and related services in violation of the FTC Act, the source says. The Federal Trade Commission did not respond to a request for comment. Microsoft spokesman Alex Haurek says the company “is fully cooperating with the FTC and believes our practices promote competition while delivering the innovative products our customers expect.”

Clients He complained – Often anonymous for fear of retaliation – which is what Microsoft does 2019 changes Its licensing terms have made running Windows software on infrastructure outside the Microsoft Azure cloud much more expensive. In 2023, Google responded to A Wide-ranging FTC inquiry. About business practices in the cloud computing industry Microsoft accuses To use dominance in other areas to “give their private cloud products an unearned advantage” and defraud consumers. Microsoft insists there is a lot of competition in the cloud sector, and Horik pointed to Google as “a clear example of that dynamic –Growth of 63% year-on-year And compete head-to-head with other major providers including AWS, the largest cloud service provider.

Shortly before the investigation has been reportedA 2024 ProPublica investigation It found that Microsoft used similar leverage to gain a foothold across US government agencies after installing free cybersecurity upgrades that come with products that run specifically on Azure, which would be difficult to switch from later. (Government contracts and cybersecurity were not among the CID topics disclosed EdgeHorik says Microsoft complied with the government’s security requests at the time and that agencies were “free to engage with other vendors.”)

Microsoft’s growth in cloud computing has… Help push its valuation to historic highsAnd its investments in space Put it to be ready To meet the massive computing requirements of artificial intelligence. Cloud growth has also occurred Revenue is subsidized While devices including Xbox experienced declines.

This type of information gathering tends to happen in the early stages of an investigation, according to George Washington University law professor and former FTC Chairman William Kovacich. The two members, All-Republican Committee He could choose to end the matter quietly without filing a complaint, with the minority party commissioners not objecting to the choice or announcing it.

Some CID questions appear to be aimed at understanding the cloud industry, including questions about company organizational charts, business and marketing plans, and product roadmaps. Companies are required to submit detailed plans for bundling multiple features and products, as well as pricing, discounting, and profitability. It seems that there are other questions that examine how difficult it is to break into the market in which Microsoft operates, and ask about the costs and obstacles that prevent entry into or expansion of these markets. The FTC specifically asks about Microsoft’s impact on competition, requesting documents that talk about the impact of Microsoft’s policies or market position as well as details about industry aggregation and interoperability practices generally, including at Microsoft.

The agency asks some similar questions about competition around AI products, including competing for customers against companies that combine additional features or services with AI or a software product like Microsoft 365.

Kovacic says the questions suggest the agency is trying to identify which key players in the market to monitor and how important tactics such as bundling are. References to artificial intelligence could indicate that the FTC views it as a potential part of an illegal linking arrangement or an important competitive advantage.

The United States is not the only country investigating this case. the European Commission, UK Competition and Markets Authorityand Japan Fair Trade Commission Microsoft’s cloud services have been investigated over the past year. Horik says Microsoft is “committed to working quickly and constructively with the CMA” in its review and is also cooperating with investigations in Europe and Japan, where the cloud sector has “never been more dynamic and competitive”.

Microsoft, a $3 trillion company, is “almost inevitable” that it will become the target of third-party antitrust complaints, Kovacic says. In the United States, Microsoft has already faced a government challenge over its acquisition of Activision Blizzard, however She eventually prevailedand has yet to face a real threat of dissolution as recently as Google, Meta, Amazon, and Apple.

Until now, Microsoft has been largely absent from the calls to break up Big Tech companies that are resonating across political campaigns and the halls of Congress. The company’s business-focused offerings have helped evade it Child safety and moderation battles Which could create political enemies. Kovacic also credits Microsoft’s adaptation after the previous monopoly case, saying it is generally viewed in the industry as having “the best compliance program” and “the best approach to dealing with regulators.”

In a landmark 1998 complaint, the Justice Department accused Microsoft of illegally linking its dominant Windows operating system to the Internet Explorer browser, driving out competitors. While the court ruled against Microsoft, the government eventually settled, allowing it to avoid dissolution. However, the issue is often credited with reining in Microsoft and allowing then-upstart companies like Google to flourish.

The case against Microsoft could impact the artificial intelligence industry as a range of companies compete for market share. Even when technology companies prevail, antitrust claims can require years of litigation Establish internal business processes under microscope. Although none of them have so far led to separation, apple and Google Both are subject to court orders restricting anticompetitive business practices. Apple and Amazon trials have not yet been conducted.

Kovacic says it’s the overall antitrust issues in technology that could tip the scales. “The direction of the entire information services sector will depend on resolving the very large number of pending cases and investigations involving major technology companies,” he says.