The Federal Trade Commission is investigating Microsoft in a wide-ranging investigation. That will determine whether a company's business operations violate antitrust laws. According to people familiar with the matter Over the past few weeks, FTC lawyers have conducted interviews and held meetings with Microsoft's competitors.
One key point of interest is how the world's largest software provider packages its popular Office product along with cybersecurity and cloud computing services. One of the people, who asked not to be named, said the matter was confidential.
This so-called grouping is a matter of Latest ProPublica investigationIt details that starting in 2021, Microsoft is using these practices to steadily expand its business with the US government. All the while robbing competitors of lucrative federal contracts.
At the time, many federal employees used software licenses that included the Windows operating system and products like Word, Outlook, and Excel. After a series of damaging cyberattacks, Microsoft offered free periodic upgrades to those licenses. limited time Giving governments access to more advanced cybersecurity products The company also provides consultants to install upgrades.
The federal bureaucracy is widely accepted. This includes all military service in the Department of Defense. Then start paying for those improved services once your free trial ends. A former sales leader involved in the effort likened it to a drug dealer who lures in users with free samples. Because they know federal customers are effectively locked into the upgrade once it's installed, Microsoft's offering doesn't just replace some existing cybersecurity vendors. But it is also taking market share from cloud providers such as Amazon Web Services as governments begin to use products running on Microsoft's own cloud platform, Azure.
Some experts told ProPublica that the company's strategy could violate laws governing contracting and competition. and news organizations reported that Even some Microsoft lawyers have antitrust concerns about the deal.
Microsoft says its offering has “Structured to avoid antitrust concerns,” “The Company's only goal during this time is to support the Administration's urgent request to improve the security posture of federal agencies that are continually being targeted by presents a sophisticated nation-state threat,” Steve Faehl, security leader for Microsoft's federal business, told ProPublica.
Some of the breaches were the result of Microsoft's security collapse, as ProPublica reported in June. Russian state-backed hackers in so-called SolarWinds attack Exploit vulnerabilities in Microsoft products to steal sensitive information from the National Nuclear Security Administration and the National Institutes of Health Including other victims For years before the attack was discovered, Microsoft engineers warned product leaders about the flaw. But they refused to fix it. For fear of alienating the federal government and losing ground to competitors, ProPublica reported.
While the engineers' proposed fix will help keep customers safe, it will create “increased speed” for users logging into their devices. Such increased “friction” is unacceptable for group managers. product It was in fierce competition at the time with competitors in the market for so-called identification tools. News organizations report These tools ensure that users have login rights to cloud-based programs. It's important to Microsoft's business strategy because it often leads to demand for the company's other cloud services.
According to a person familiar with the FTC's investigation, one identity product, Entra ID, formerly known as Azure Active Directory, is another focus of the agency's investigation.
Microsoft has defended its decision to continue fixing SolarWinds-related flaws, telling ProPublica in June that the company's assessment included “Multiple inspections” were performed at the time and responses to security concerns were based on “Potential customer disruption utilization and mitigating existing impacts ” ” by pledging to give importance to safety “Above all else”
FTC sees Microsoft winning more federal business Even if it leaves the government vulnerable to hacking. This is one example of the company's market dominance problem. A person familiar with the investigation told the news organization.
The committee is not alone in that view. “These people are the version 'Too big to fail,'” said Sen. Ron Wyden, Oregon Democrat who chairs the Senate Finance Committee. and a long-time critic of Microsoft, “I think it's time to step up the company's antitrust agenda. by addressing antitrust violations.”
FTC's investigation into Microsoft, first reported by Financial Times and BloombergIt's far from the company's first brush with federal regulators over antitrust issues. More than two decades ago The Justice Department sued the company in a landmark antitrust case that nearly resulted in the company's breakup. Federal prosecutors accused Microsoft of maintaining an illegal monopoly in the operating system market through anticompetitive behavior that prevented competitors from gaining a foothold. Ultimately, the Justice Department settled with Microsoft, and a federal judge approved it. royal consent decree It sets limits on how companies can develop and license software.
John Lopatka, former FTC counsel who Now taught Antitrust law enforcement at Penn State told ProPublica that Microsoft's actions detailed in the news organization's latest reporting were in accordance with “Very familiar pattern” of behavior
“It mirrors the Microsoft case” from decades ago, said Lopatka, who co-wrote a book about the case.
In the new investigation, the FTC has filed a civil investigative demand against Microsoft, which is a subpoena that compels the company to hand over data. People familiar with the investigation said Microsoft confirmed it had received the documents.
Company spokesman David Cuddy did not comment on the specifics of the investigation. But said the FTC's demands were “broad, diverse, and asked for things that are outside the realm of even reasonable possibility.” He declined to provide a recorded example. The FTC declined to comment.
The agency's investigation follows a public comment period in 2023, during which the agency sought information about cloud computing service providers' business practices. Once it was finalized, the FTC said it continued to have interest:sure Business practices are stifling competition.”
The latest demands against Microsoft mark one of FTC Commissioner Lina Khan's final moves in her tenure as chairman. And the investigation appears set to intensify as the Biden administration ends. However, the commission's new leadership will decide the probe's future.
Donald Trump the new president said this month he would appoint Commissioner Andrew Ferguson, a Republican lawyer. to be the leader of such agency After Ferguson's announcement Said in a post on“At the FTC, we will end Big Tech's vendetta against competition and free speech. We will make sure America is a world technology leader and the best place for creators to bring new ideas to life.”
Trump also said he would nominate Republican lawyer Mark Meador as commissioner. Describing him as “Antitrust” He previously worked at the FTC and the Department of Justice. Meador is also a former aide to Sen. Mike Lee, the Utah Republican who introduced legislation to break up Google.