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April 22, 2022

Déjà-vu: Microsoft heads for an antitrust showdown

Microsoft has long avoided the techlash on antitrust issues that has plagued rival tech giants over the last few years. The Seattle-based giant was able to maintain the image of a company that had learned from the previous battles two decades ago, when both the US Department of Justice and the EU sued the company for its anticompetitive behaviour. But things are changing, as European policymakers and legislators move to more closely regulate the cloud market and cloud providers start to file complaints against Microsoft’s allegedly anticompetitive practices.

Is Microsoft really any different from GAFA?

Most of the recent backlash by regulators has focused on the other four big tech companies—Google, Apple, Facebook (Meta), and Amazon—or ‘GAFA’ for short. These are all increasingly viewed as digital monopolies with excessive control over user data.

Unlike these companies, Microsoft relies on a reasonably diversified business, based on license fees, the sale of devices, and product integration, and it did not seem to engage in any major anticompetitive practices. However, the tide turned in 2020 when rival cloud company Slack filed a complaint with EU regulators. The collaboration tool company accused Microsoft of illegally tying its Teams messaging service with its Office products, forcing people to install it.

Bundling practices are in the spotlight again

More recently, complaints have focused on changes to some of Microsoft’s terms of business, which critics say amount to anticompetitive tactics. By using Windows and its Office products to feed the growth of Azure, Microsoft allegedly aimed to draw customers away from its rivals, and away from Amazon Web Services in particular, which dominates the cloud market.

In 2021, the German cloud-storage company Nextcloud made a complaint to the EU about Microsoft’s bundling of its OneDrive storage product with its Windows operating system. In March of this year, a French cloud-computing company, OVHcloud, filed another complaint in Brussels denouncing the way Microsoft licenses its products, such as its Office productivity suite, which may make it more expensive to use cloud services that compete with Microsoft’s Azure cloud. This all appears reminiscent of when the company faced backlash for its bundling practices in its operating system in the 1990s.

Ensuring minimum conditions to avoid monopolies

In 2000 Microsoft was found to have violated US antitrust laws through predatory and anticompetitive behavior. The lawsuit did not end with just a fine, the US Department of Justice required the company to be broken into two entities—one for the Windows operating system and one for the products. The split never happened, but other remedies were imposed, like the enforced sharing of programming information with third-party companies.

Since the US DoJ opened the first probe into IBM in 1969, several lawsuits have been pursued against tech companies worldwide. However, these and other lawsuits demonstrated that existing antitrust rules are broad in scope and only allow enforcers to act after wrongdoing has been committed. As a result, new approaches are often recommended that introduce strict and transparent rules applied to digital platforms before they engage in any anticompetitive behavior.

New EU antitrust law may spell trouble for Microsoft

Brussels has been leading the latest efforts. It is currently finalizing the Digital Markets Act (DMA), legislation that aims to constrain platforms so that they do not become monopolies. It defines scale in terms of both global turnover and the number of users to identify ‘gatekeepers’ that require monitoring. While the law was originally intended to target consumer internet platforms, the EU might well decide to extend its domain to business software companies like Microsoft. The cloud giant’s practices are not illegal under the current law. However, the DMA may change that, as it sets strict and transparent rules for digital platforms before they engage in any anticompetitive behaviour.