US Antitrust Watchdog Launches Broad Microsoft Investigation

The US Federal Trade Commission has opened an antitrust investigation of Microsoft Corp., drilling into everything from the company’s cloud computing and software licensing businesses to cybersecurity offerings and artificial intelligence products.

After more than a year of conducting informal interviews with competitors and business partners, antitrust enforcers have crafted a detailed request to force Microsoft to turn over information, according to people familiar with the matter. The demand, which is hundreds of pages long, has been sent to the company after FTC Chair Lina Khan signed off, said one of the people.

A Microsoft store in New York

Photographer: Jeenah Moon/Bloomberg

FTC antitrust lawyers are set to meet with Microsoft competitors next week to gather more information about the Redmond, Washington-based company’s business practices, according to two other people familiar with the plans who like the others asked not to be named discussing a confidential matter.

Microsoft and the FTC declined to comment.

The FTC’s scrutiny of Microsoft’s cloud computing business gained steam after a string of cybersecurity incidents that involved the company’s products. The company is a top government contractor, providing billions of dollars in software and cloud services to US agencies including the Defense Department.

The Microsoft information demand is one of Khan’s parting shots as she steps down after helming one of the most aggressive pushes against consolidated corporate power the agency has delivered in decades. While business leaders are hoping that President-elect Donald Trump will usher in an era of lighter regulation, it will fall to his new FTC chair — still unnamed — to decide how to proceed with the case.

Read more: Lina Khan Has Plenty More Targets—If She Gets Another Term

The FTC inquiry renews scrutiny of Microsoft for its business practices more than 25 years after the government sued the company over similar conduct involving bundling its Windows operating system and browser and unsuccessfully tried to break it up.

A key focus of the current probe is Microsoft’s bundling of both its popular office productivity and security software with its cloud offerings, according to the people familiar with the information request.

Microsoft’s cybersecurity failings, combined with its heft as a government contractor, are seen by the FTC as an example of the company’s problematic power over the market, those people said.

In a November 2023 report, the FTC highlighted concerns that the concentrated nature of the cloud market means that “outages, or other issues that degrade the service of a cloud provider, could have a cascading impact on the economy or specific sectors.”

The CrowdStrike crash that affected millions of devices operating on Microsoft Windows systems earlier this year was itself a testament to the widespread use of the company’s products and how it directly affects the global economy.

A portion of the probe is focused on the company’s practices related to security software called Microsoft Entra ID — formerly known as Azure Active Directory — which helps authenticate users logging in to cloud-based software, some of the people said.

Competitors have complained that Microsoft’s licensing terms and bundling of software with cloud services makes it harder for rival authentication and cybersecurity companies to compete.

Companies such as Salesforce Inc.’s Slack and Zoom Communications Inc. have said that Microsoft’s practice of giving away its Teams video-conferencing software for free in a bundle with popular software products like Word and Excel is anticompetitive and makes it harder for them to compete.

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Josh Sisco in San Francisco at jsisco6@bloomberg.net;
Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Robin Ajello

© 2024 Bloomberg L.P. All rights reserved. Used with permission.

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