The Federal Trade Commission is investigating Microsoft as part of a wide-ranging investigation into whether the company’s business practices violate antitrust laws, according to people familiar with the matter. In recent weeks, FTC lawyers have conducted interviews and held meetings with Microsoft competitors.
One key area of interest is how the world’s largest software provider bundles popular Office products with cybersecurity and cloud computing services, said one of the people, who asked to remain anonymous , discussing a confidential matter.
This so-called grouping was the subject of a a recent ProPublica investigationwhich details how, as of 2021, Microsoft has used this practice to significantly expand its business with the US government while excluding competitors from lucrative federal contracts.
At the time, many federal employees used software licensing that included the Windows operating system and products like Word, Outlook, and Excel. Following several devastating cyberattacks, Microsoft offered to upgrade these license sets for free for a limited time, giving the government access to its most advanced cybersecurity products. The company also provided consultants to install the upgrades.
Large swaths of the federal bureaucracy agreed, including all military services within the Department of Defense – and then began paying for these enhanced services when the free trial ended. Former sales executives involved in the effort likened it to a drug dealer offering a user free samples, because they knew federal customers would effectively be locked into upgrades once they were installed. Microsoft’s offering not only replaced some existing cybersecurity vendors, but also took market share from cloud providers like Amazon Web Services, as the government began using products running on Azure, Microsoft’s own platform. Microsoft cloud form.
Some experts told ProPublica that the company’s tactics could have violated laws governing contracts and competition, and the news organization reported that even some of Microsoft’s own lawyers had antitrust concerns about the deals.
Microsoft said its offer was “structured to avoid antitrust concerns.” “The company’s sole objective during this period was to respond to an urgent request from the administration to improve the security posture of federal agencies that were continually being targeted by sophisticated state-level threat actors.” , said Steve Faehl, head of security for Microsoft’s federal operations. told ProPublica.
Some of these incursions were the result of Microsoft security breaches. As ProPublica reported in June, Russian state-sponsored hackers in the so-called SolarWinds attack exploited a weakness in a Microsoft product to steal sensitive data from the National Nuclear Security Administration and the National Institutes of Health, among other victims. Years before the attack was discovered, a Microsoft engineer had warned product managers about the flaw, but they refused to fix it for fear of alienating the federal government and losing ground to their competitors, ProPublica reported.
While the engineer’s proposed fix would have kept customers safe, it also would have created a “speed bump” for users logging into their devices. Adding such “friction” was unacceptable for the product group’s executives, who at the time found themselves in a fierce rivalry with competitors in the market for so-called identity tools, the news agency reported. These tools, which ensure that users have permission to connect to cloud-based programs, are important to Microsoft’s business strategy because they often drive demand for the company’s other cloud services.
Another target of the agency’s investigation is one of those identity products, Entra ID, formerly known as Azure Active Directory, according to a person familiar with the FTC investigation.
Microsoft defended its decision not to address the SolarWinds breach, telling ProPublica in June that the company’s assessment included “multiple reviews” at the time and that its response to security issues was based on “a potential customer disruption, operability, and available mitigations.” » He pledged to put safety “above all”.
The FTC views Microsoft’s winning of more federal contracts, even though it left the government vulnerable to hacks, as an example of the company’s problematic market power, a person familiar with it told the news agency. of the investigation.
The commission is not the only one to share this point of view. “These guys are kind of a version of ‘too big to fail,'” said Sen. Ron Wyden, an Oregon Democrat who chairs the Senate Finance Committee and a longtime critic of Microsoft . “I think it’s time to strengthen the antitrust side of the house, going after antitrust abuses.”
The FTC’s investigation into Microsoft, which was first reported by the Financial Times And Bloombergis 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 led to its breakup. Federal prosecutors alleged that Microsoft maintained an illegal monopoly in the operating systems market through anticompetitive behavior that prevented competitors from gaining a foothold. Ultimately, the Justice Department settled with Microsoft and a federal judge approved a judgment of consent this placed restrictions on how the company could develop and license software.
John Lopatka, a former FTC consultant who now teaches Penn State Antitrust Law, told ProPublica that Microsoft’s actions detailed in the news agency’s recent report followed “a very familiar pattern of behavior.”
“It echoes the Microsoft case” from decades ago, said Lopatka, co-author of a book about the case.
As part of the new investigation, the FTC sent Microsoft a civil investigative request, the agency’s version of a subpoena, requiring the company to provide information, people familiar with the matter said. . Microsoft has confirmed that it has received the document.
Company spokesman David Cuddy did not comment on the details of the investigation, but said the FTC’s request is “broad, far-reaching, and only asks for things that are outside the realm of possibility are even logical. He declined to provide official examples. The FTC declined to comment.
The agency’s investigation follows a public comment period in 2023 in which it sought information on the business practices of cloud computing providers. Once this conclusion was reached, the FTC stated that it still wanted to know whether “certain business practices hinder competition.
The recent request to Microsoft represents one of the final actions taken by FTC Commissioner Lina Khan as chair, and the investigation appears to be gaining momentum as the Biden administration winds down . The new leadership of the commission will, however, decide the future of the investigation.
President-elect Donald Trump said this month he would nominate Commissioner Andrew Ferguson, a Republican lawyer, to lead the agency. Following the announcement, Ferguson said in a post on“At the FTC, we will end Big Tech’s vendetta against competition and free speech. We will ensure that America is the world’s technology leader and the best place for innovators to bring new ideas to life.
Trump also said he would nominate Republican lawyer Mark Meador as commissioner, describing him as a “antitrust enforcer” who previously worked at the FTC and the Department of Justice. Meador is also a former aide to Sen. Mike Lee, a Utah Republican who introduced legislation to break up Google.
2024-12-28 14:00:00 ,