The US Federal Trade Commission (FTC) has initiated a sweeping antitrust investigation into Microsoft, scrutinising various aspects of the tech giant’s operations, including its cloud computing, software licensing, cybersecurity, and artificial intelligence (AI) businesses, according to reports citing sources privy to the matter.
Reportedly approved by the FTC Chair Lina Khan before her anticipated departure in January, the probe involves a demand for information spanning hundreds of pages, building on more than a year of informal discussions with Microsoft’s competitors and partners.
Central to the US antitrust agency’s investigation are allegations that Redmond uses restrictive licensing agreements to stifle competition. Critics claim these practices penalise customers who migrate data from Microsoft’s Azure cloud platform to rival services. Reports suggest that Microsoft’s integration of AI tools into products like Office and Outlook, as well as its bundling of productivity and security software with Azure, are key areas of concern.
The FTC’s interest in Microsoft’s cloud business has intensified in light of high-profile security breaches affecting its products. Microsoft, a major software provider to US government agencies, has faced criticism from the government’s Cyber Safety Review Board for its “inadequate” security practices.
Complaints from competitors
Rival firms and advocacy groups have expressed discontent with Microsoft’s market behaviour. NetChoice, a lobbying organisation representing online companies including Amazon and Google, has condemned Microsoft’s licensing policies. In September, Google filed a complaint with the European Commission (EC) alleging that Microsoft imposes up to a 400% markup for running its software on competitor cloud platforms. The search giant added that Microsoft’s licensing terms create significant challenges and impose high costs for running Windows Server and Office products on cloud platforms other than Azure.
The FTC’s investigation is also expected to build on feedback gathered last year from industry stakeholders and the public regarding the practices of cloud service providers. Respondents raised issues including restrictive software licensing agreements that hinder interoperability, excessive data transfer fees, and minimum spending requirements that lock customers into specific providers.
In addition, the US agency reportedly extended its oversight to Redmond’s involvement in AI, including its $650m acquisition of AI startup Inflection AI and its collaboration with OpenAI. Microsoft CEO Satya Nadella recently testified in a separate antitrust case involving Google, accusing the search giant of anti-competitive practices in its use of exclusive deals for content vital to AI training.
Microsoft’s cloud operations have also attracted regulatory scrutiny beyond the US. In the UK, the Competition and Markets Authority (CMA) is investigating the company’s practices, following a report by Ofcom which highlighted concerns over “lock-in” strategies, exclusive discounts, and high fees for transferring data out of Microsoft’s cloud services.
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