Actions initiated as antitrust enforcement of Big Tech changes hands in the US.
The Federal Trade Commission (FTC) reportedly is investigating Microsoft for potential anti-competitive practices related to its cloud computing, software licensing, cybersecurity, and artificial intelligence offerings. The company is also facing an investigation in Europe and private litigation in the U.K. Microsoft has been added to a surprisingly revived antitrust lawsuit filed in the U.S. by Elon Musk, initially filed against OpenAI alone. These developments come at a time when antitrust enforcement in the U.S. is getting new leadership.
The FTC is “drilling into everything from the company’s cloud computing and software licensing businesses to cybersecurity offerings and artificial intelligence products,” Bloomberg News reported. Citing unnamed sources familiar with the matter, the report says the government has compiled a lengthy demand for information following more than a year of interviews with competitors and business partners. The demand was sent to Microsoft with the approval of Lina Khan, outgoing FTC Chair. The Associated Press confirmed, also via an unnamed source, that the FTC is focusing on Microsoft’s cloud computing business and related product lines such as artificial intelligence and cybersecurity.
The company is being investigated by the European Commission, as well, for potential anti-competitive practices related to its bundling of Microsoft Teams with its Office 365 suite. The Commission believes that this practice may unfairly limit competition for other video conferencing and collaboration tools. See our previous story.
In the U.K., meanwhile, two cloud computing providers have sued Microsoft for abusing its dominant position to charge excessive fees for cloud services. The plaintiffs, who seek $1.25 billion in damages, contend that Microsoft leveraged its dominant position in the PC operating system market to unfairly tie customers to its Azure cloud platform. They argue that Microsoft used tactics such as bundling, exclusive contracts, and predatory pricing to stifle competition and charge exorbitant fees.
Back in the U.S., Elon Musk has revived his litigation against OpenAI, its CEO Sam Altman, and others for breaching a purported agreement to operate the business for charitable purposes. Musk dropped the suit earlier this year, but on Nov. 14 filed a new complaint in the Northern District of California to add claims of antitrust violations and Microsoft as a defendant. Working with Microsoft and taking investment from the tech giant is commercializing OpenAI in a way Musk says he and co-founders Altman and Greg Brockman agreed would not happen. They say there was no such agreement. See related story.
Concerns Over Microsoft’s Power Are Valid
Microsoft has again reached a point where its immense power is drawing serious and valid antitrust scrutiny on multiple fronts. One of the primary concerns is the company’s hold on the operating system market, giving it significant power over hardware manufacturers and software developers. Its aggressive expansion into cloud computing via its Azure platform has raised new concerns about potential anti-competitive behavior. It has an estimated 68.6% market share while Amazon, its nearest competitor, has a less than 9% share. The company’s acquisition of gaming goliath Activision Blizzard only adds to Microsoft’s muscle in that burgeoning market as well. Such power can be leveraged to gain an unfair advantage, preventing smaller innovative companies from advancing the technology and serving businesses and consumers.
Breaking out pieces of Microsoft could ignite new competition and innovation, and lower prices. Smaller, nimble companies could emerge, driving technological advancements and offering consumers more choices. Decreasing Microsoft’s control could also address data privacy and security concerns, as smaller companies have and may innovate new ways to protect data.
Antitrust at a Turning Point
Will Microsoft and other tech giants be allowed to grow unchecked? Or will government agencies and private litigants be able – by targeting anticompetitive practices and anticompetitive mergers and acquisitions – to curb their grip on important markets? The future of Big Tech and other industries will be shaped by how these questions are answered.
Another important question is whether the Trump administration will prioritize antitrust enforcement as the Biden administration has. The president-elect’s recent comments on social media suggest his administration will continue to go after Big Tech for what he sees as anticompetitive abuses and attacks on free speech. “Big Tech has run wild for years,” he wrote in a post, “stifling competition in our most innovative sector and, as we all know, using its market power to crack down on the rights of so many Americans, as well as those of Little Tech!” It was after Trump was banned from Twitter that he launched his own Truth Social platform. After Elon Musk purchased it and renamed it X, Trump was back on the platform.
Also, it was during the first Trump administration that the government sued Google. That suit was carried forward by the Biden administration which secured a major ruling that the company is operating as an illegal monopoly. But Trump also recently commented that he was (at least in that moment), opposed to breaking up Google. Trump is expected by some observers to lighten up on mergers and acquisitions, which has been a focus of the Biden administration.
The president-elect’s pick this week for Assistant Attorney General to lead the Department of Justice Antitrust Division seems in line with his pledge to tangle with Big Tech. Former FTC attorney advisor Gail Slater is seen as a strong supporter of antitrust enforcement. She served under former FTC Commissioner Julie Brill, a Democrat and champion of antitrust enforcement. She worked with the House Antitrust Subcommittee during its investigation of digital markets and has worked with Republicans to build support for antitrust reform. In 2018, she helped the Trump administration develop policies on 5G wireless telecommunications, privacy and cybersecurity. She was general counsel at the now defunct Internet Association which represented big tech players like Amazon, Facebook, Google and Microsoft. Slater was senior vice president for policy and strategy at Fox and later deputy general counsel at Roku. She was also economic policy advisor to now-vice-president-elect J.D. Vance.
Antitrust watchers believe Slater is a refreshing choice. Some of the cabinet picks have been controversial, to say the least, including Trump’s picks to be Slater’s boss. The next nomination to watch will be head of the FTC. It is a sure bet that the post will be filled by someone very different from Chair Khan, who is considered by many conservatives and business leaders to be too aggressive when it comes to antitrust enforcement. She did, after all, garner attention with a paper advocating for changes in antitrust laws to deal with Amazon, a dominating platform (like others) which she said achieved that dominance through anticompetitive means.
As they say, watch this space.
Update (Dec. 9, 2024) — Microsoft has asked for an investigation into whether the FTC improperly leaked information about the investigation.
