FTC opens antitrust investigation against Microsoft's business practice

The US Federal Trade Commission has opened a sweeping antitrust probe of Microsoft, examining the technology giant's software licensing and cloud computing business, said people familiar with the matter.

It approved the probe days before the expected exit of Chairman Lina Khan, which some anticipate will lead to the FTC chair being replaced by a Republican under a new administration that could change the way the investigation plays out.

The FTC is investigating allegations that Microsoft is using its market power in the productivity software space to enforce restrictive licensing terms, particularly designed to prevent customers from migrating data from its Azure cloud service to competing platforms.

This issue was highlighted earlier this month, with competitors and other industry players raising concerns over the company's practices.

Along with scrutinising Microsoft's cloud services, the FTC is looking into the company's cybersecurity and AI products. The software giant has faced criticism on practices that critics argue lock customers into its ecosystem, particularly for Azure and the integration of AI tools into Office and Outlook.

NetChoice, a lobbying group that represents tech giants like Amazon and Google, attacked Microsoft's licensing practices, pointing out the company's dual dominance in both productivity software and operating systems. "The scale and consequences of its licensing decisions are extraordinary," the group said.

Google has raised similar concerns with the European Commission lately, accusing Microsoft of excessive fees and restrictive security updates for customers running Windows Server on rival cloud platforms. According to Google, such practices by Microsoft resulted in a 400 per cent price markup and delayed, limited security patches for these customers.

The investigation by the FTC spans wide-ranging practices, as the agency requires detailed information from Microsoft. This is following previous scrutiny of the company's involvement in artificial intelligence, such as the $650 million acquisition of AI startup Inflection AI.

The FTC had already investigated competition in the cloud computing market and the relationship of Microsoft with OpenAI, where it raised concerns about how the company might impact competition in the emerging AI sector.

While Microsoft has traditionally been less affected by US antitrust enforcement compared to other Big Tech firms, such as Facebook owner Meta Platforms, Apple, and Amazon, it has experienced legal challenges in the past.

Alphabet's Google is also currently involved in two major anti-competitive behaviour lawsuits, one of which resulted in a judge ruling the company illegally stifled competition in the online search engine market.

The timing of the FTC's investigation raises questions about the future of antitrust enforcement under the next US administration. "Changes in administration can lead to evolving enforcement priorities and shifts in how aggressively certain types of conduct are scrutinised," said Andre Barlow, an attorney at Doyle Barlow & Mazard. It is unclear whether a change in leadership under President-elect Donald Trump will ease the scrutiny on Big Tech firms.

Despite these, Microsoft has previously benefited from some Trump administration policies. For instance, in 2019, the Pentagon awarded Microsoft a $10 billion cloud computing contract. The award was challenged by Amazon, which accused Trump of influencing the award process.

(With inputs from agencies)