Trump’s FTC Intensifies Microsoft Antitrust Probe
WASHINGTON – The US Federal Trade Commission (FTC) is pressing ahead with a wide-ranging antitrust probe of Microsoft Corp., signaling a more aggressive stance toward tech giants under the leadership of FTC Chair Andrew Ferguson. The investigation, originally launched during the Biden administration, now appears to be a priority for the Trump-appointed head of the agency.
A Microsoft store in New York (Jeenah Moon/Photographer: Jeenah Moon/Bloomb)
FTC staff have maintained the investigation in recent weeks, engaging with various companies and groups to gather information, according to sources familiar with the matter. These individuals requested anonymity due to the confidential nature of the probe.
Late last year, the FTC issued a civil investigative demand (CID) to Microsoft, akin to a subpoena. This document, of which Bloomberg obtained a copy, compels Microsoft to provide extensive data regarding its AI operations. The requested information encompasses the costs associated with training AI models and acquiring data, dating back to 2016. The agency also sought details about Microsoft’s data centers, its struggles to secure sufficient computing power, and its software licensing practices.
Adding to the scrutiny, the FTC is examining Microsoft’s decision to reduce funding for its own artificial intelligence projects after partnering with OpenAI. This move raises concerns about potential harm to competition in the rapidly expanding AI market.
One company, in particular, has been in regular contact with the FTC regarding Microsoft’s licensing practices since the initial CID was issued. Lawyers representing the company have discussed the specifics of information the agency may request in a more comprehensive manner. The company also received a short questionnaire several weeks ago, asking for documents it had previously provided to other regulatory bodies.
According to sources, the FTC is seeking details on Microsoft’s planned licensing rule changes, slated to take effect later this year.
The agency stated in the information demand that it seeks to understand whether Microsoft’s profits from other business sectors give it an unfair advantage over competing AI firms. Furthermore, the agency seeks detailed information about Microsoft’s data center capacity constraints to better understand the costs related to its cloud-computing services. This information will aid the agency in deciding whether to pursue legal action.
Since receiving the FTC demand, Microsoft may have sought to narrow the scope of the information it’s being asked to provide, a typical strategy for companies facing agency probes. Such expansive antitrust investigations can span years and may not always culminate in the agency bringing a case.
“We are working cooperatively with the agency,” said Alex Haurek, a Microsoft spokesman. The FTC declined to comment.
As the investigation evolves, its direction rests in the hands of Ferguson and Daniel Guarnera, the new head of competition, who joined the agency from the Justice Department, where he worked on antitrust cases involving Alphabet Inc.’s Google and Apple Inc. Ferguson has stated that probing the tech sector is his top priority.
Ferguson previously supported a filing in January that backed billionaire Elon Musk, who sued to halt OpenAI’s plans to reorganize as a more conventional for-profit entity. The CID was drafted by FTC staff and personally approved by former Chair Lina Khan, following more than a year of informal interviews with Microsoft’s competitors and business partners, Bloomberg reported. The current FTC also inherited several other cases against major tech companies from Khan, including lawsuits against Meta Platforms Inc. and Amazon.com Inc.
Most of the questions in the FTC’s demand relate to how Microsoft licenses its software products, especially within its cloud-computing offerings. Competitors have complained that Microsoft’s licensing terms and bundling of popular office and security software with its cloud services make it harder for them to compete.
About a third of the questions focus on Microsoft’s AI business, underlining the importance of this emerging technology to the company’s future. Underlying the FTC’s requests are concerns that Microsoft canceled some of its own internal development after deciding to invest in OpenAI and heavily depending on OpenAI’s GPT software.
Despite investing a substantial sum, Microsoft did not disclose its investment to competition regulators beforehand. The FTC is also investigating whether the deal was structured as a partnership to sidestep a merger investigation, according to Bloomberg reports.
When Microsoft initially invested in OpenAI in 2019, the startup was a promising research lab looking for funding to support the cloud-computing power necessary to create AI models. Microsoft began with a $1 billion investment after co-founder Musk withdrew his support. Microsoft had been working on a variety of internal AI projects for more than two decades, fearing it was falling behind its competitor, Google. These company efforts, however, were spread across various divisions and weren’t delivering the results that Chief Executive Officer Satya Nadella had hoped for. In 2023, one month after investing an additional $10 billion into OpenAI, Microsoft unveiled a series of products leveraging OpenAI technology. This shift prompted the FTC to investigate the company’s decision to scale back its internal AI development efforts.
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