Microsoft Faces Antitrust Probe FTC Targets AI Cloud and Security Dominance

FTC's Antitrust Investigation Into Microsoft Sparks Renewed Scrutiny

The US Federal Trade Commission (FTC) has ramped up its scrutiny of Microsoft, launching a detailed antitrust investigation into the company's vast business operations.

The probe spans across multiple areas, including Microsoft’s cloud computing services, software licensing models, cybersecurity products, and artificial intelligence (AI) developments.

The investigation follows a year of informal interviews with competitors and business partners, leading to a detailed request for information sent to Microsoft.

According to sources familiar with the matter, the FTC has issued a comprehensive, hundreds of pages long request for information, which Microsoft is now required to respond to.

This marks a significant escalation, with FTC Chair Lina Khan approving the request.

Microsoft's Cloud Business Comes Under Fire

A significant part of the FTC's investigation focuses on Microsoft's cloud computing operations, particularly in light of several cybersecurity failures.

As a leading government contractor, Microsoft provides essential software and cloud services to US agencies, including the Department of Defense, which has only magnified the stakes.

The FTC’s concerns are heightened by the cascading effects that any disruptions to Microsoft's cloud services could have on the economy.

For example, earlier in 2024, a CrowdStrike crash that impacted millions of devices running on Windows systems highlighted how such failures can ripple across industries, reflecting the massive impact of Microsoft’s products.

Security Software and Market Dominance

One area that has drawn particular attention from the FTC is Microsoft’s handling of security software, specifically Microsoft Entra ID (formerly Azure Active Directory).

The tool is pivotal in authenticating users accessing cloud-based services, and competitors have raised alarms about Microsoft’s bundling practices.

By including security and office software alongside its cloud offerings, Microsoft makes it increasingly difficult for rival firms in the authentication and cybersecurity sectors to compete.

These bundling strategies, according to insiders, give Microsoft a disproportionate advantage, cementing its dominance in multiple markets.

A Growing AI Presence Fuels Concern

Microsoft’s influence has grown beyond traditional software and cloud services, thanks to its investments in AI, notably through its partnership with OpenAI and the development of its own Copilot system.

This expansion into the AI sector, combined with its established business practices, has led European regulators to consider investigations into Microsoft’s role in the AI space.

Although those efforts didn’t materialise into a formal probe, they contribute to the broader scrutiny surrounding Microsoft’s market power.

The company's strategic investments in AI now sit alongside its already formidable presence in gaming, cloud computing, and enterprise software.

A Long History of Antitrust Challenges

Microsoft's history with antitrust investigations dates back more than two decades, with a major legal battle over its bundling of Windows and Internet Explorer in the late 1990s.

The current investigation, though, shines a spotlight on Microsoft’s business practices in a landscape vastly different from that of the 1990s.

Now, in 2024, the FTC is examining how Microsoft's integration of various services across software, cloud, and security could potentially stifle competition, similar to concerns from the past.

Antitrust Tensions Ahead for the FTC

The timing of the investigation is crucial, with the departure of FTC Chair Lina Khan looming as the Biden administration nears its conclusion.

Lina Khan has been leading the US Federal Trade Commission as the chairman since 2021.

Business leaders have speculated that the incoming administration, under President-elect Donald Trump, may adopt a different approach to regulating big tech, potentially signalling a shift away from aggressive antitrust enforcement.

However, with the FTC's investigation in full swing, the fate of this and other cases will rest in the hands of the next FTC chair.

As the agency continues its work under Khan’s leadership, the industry waits to see whether this probe will result in concrete action, or whether it will be sidelined under a new administration.

Rising Regulatory Pressure on Tech Giants

The investigation into Microsoft is just one example of the increasing scrutiny faced by major tech companies.

The Federal Trade Commission’s (FTC) actions against Meta and its ongoing probe into Google reflect a wider concern about the growing influence of big corporations.

The Microsoft case, in particular, raises important questions about how regulators will handle the concentration of power in the tech industry, especially as companies like Microsoft extend their reach into new sectors such as AI and cybersecurity.

While the outcome of this investigation remains uncertain, its impact could reshape the future of corporate regulation in the United States, with potential consequences for the tech sector as a whole.