Microsoft’s Antitrust Troubles: A Shadow Over AI’s Reign
Microsoft, riding high on its dominance in the AI sector, has become the world’s second-most valuable company, estimated to be worth approximately $3 trillion. However, this success could soon face a serious test. A federal antitrust investigation is threatening to disrupt Microsoft’s current trajectory, much like a previous legal battle did 35 years ago, causing the company to lose its spot in the market. That first suit led to a lost decade for Microsoft.
The FTC’s Scrutiny
The investigation, initiated last year by the Federal Trade Commission (FTC) under Chair Lina Khan, has gained momentum. The FTC, now under new leadership, has requested extensive information from Microsoft regarding its AI operations since 2016. This includes deep dives into training models and data acquisition methods.
Scope of the Investigation
The probe is extensive, covering several of Microsoft’s key areas: cloud operations, cybersecurity, productivity software (including Teams), and licensing practices. Each of these areas has come under scrutiny.
Cloud and Licensing Practices
A significant portion of the investigation concentrates on how Microsoft bundles its cloud services with products like Microsoft 365. There’s concern that the company uses licensing practices to lock customers into its ecosystems. The New York Times noted the FTC’s keen interest in how Microsoft “bundles its cloud computing offerings with office and security products.” This is, in particular, regarding changes in terms that may penalize customers who use other cloud providers.
Last summer, European Union regulators accused Microsoft of breaking antitrust laws by bundling Teams into its Microsoft 365 productivity suite. The EU argued that Teams rivals don’t have the same bundling capabilities as Teams, giving Microsoft an unfair advantage.
AI Under the Microscope
Microsoft’s AI business is also a key target of the investigation. The probe may focus on whether Microsoft’s partnership with OpenAI violates antitrust laws, potentially giving Microsoft an unfair market dominance. It could also investigate whether practices around bundling Microsoft 365 and Copilot, its generative AI chatbot, are in violation of these laws.
Notably, Microsoft now requires consumers to pay extra for Copilot with the consumer version of Microsoft 365—whether they use it or not. Along with the initial bundling of Copilot, Microsoft also raised prices on the suite by $3 per month or $30 for the year. Consumers who want Microsoft 365 are forced to purchase Copilot, whether they intend to use the feature or not. Furthermore, Microsoft killed two formerly well-used features in Microsoft 365 suite, pushing business to subscribe to Copilot to regain such utility.
The Road Ahead: Legal Battles Expected
It’s highly probable that the government will file at least one lawsuit against Microsoft, potentially through the FTC or the Justice Department. The Biden administration’s actions against tech giants such as Amazon, Apple, Google, and Meta set a precedent during Trump’s term.
Another factor is Elon Musk’s lawsuit against OpenAI and Microsoft, which alleges antitrust violations. Musk, a significant tech advisor to Trump, adds weight to the possibility of further suits. The FTC has already supported Musk’s claims.
Potential Outcomes
The investigations may result in one or more lawsuits against Microsoft. Potential outcomes include breaking up the company, fines, or forced modification of its business practices. The future success of Microsoft, and whether CEO Satya Nadella can navigate these challenges effectively, remains to be seen.
