The US Federal Trade Commission (FTC) has initiated an antitrust investigation into Microsoft, focusing on its cloud computing, software licensing, cybersecurity, and artificial intelligence businesses. This investigation comes after a year of informal interviews with competitors and partners. The FTC’s antitrust lawyers have requested a thorough response from Microsoft, as indicated by a detailed information demand sent to the company.

This investigation is primarily concerned with Microsoft’s potential market dominance, particularly regarding how it bundles its software products—specifically, office productivity and security software—with its cloud services. Critics assert that this practice gives Microsoft an unfair advantage over competitors, particularly in the authentication and cybersecurity markets. Attention is being drawn to Microsoft Entra ID, their user authentication service, due to claims that its integration with other cloud offerings hampers competition.

Moreover, the urgency of the investigation has been heightened by Microsoft’s role as a key government contractor, especially given recent cybersecurity breaches involving its products. Since Microsoft provides essential services to various US federal agencies, including the Department of Defense, its business practices carry significant national security implications.

Just recently, the FTC had voiced concerns about the highly concentrated nature of the cloud market, warning that outages or issues could have widespread economic effects. Their findings arose from collecting feedback from various stakeholders, which primarily highlighted issues surrounding competition and licensing practices.

In the UK, Microsoft is facing a similar antitrust inquiry led by the Competition and Markets Authority, a response to AWS’s complaints regarding Microsoft’s trading practices.

This investigation appears to be one of the last significant actions led by Lina Khan, known for her aggressive approach towards corporate consolidation and antitrust measures. She may step down as President Trump prepares to assume office, introducing regulatory uncertainties since Trump’s stance on tech regulation remains ambiguous. Under the Biden administration, the FTC had pursued actions against other tech giants, including Amazon and Meta, alongside significant lawsuits from the Department of Justice against Google and Apple.

This renewed scrutiny from regulators echoes the notable antitrust case against Microsoft that occurred more than 25 years ago, which revolved around the bundling of the Windows operating system with its Internet Explorer browser. The outcome of the current FTC investigation could lead to far-reaching effects not only for Microsoft but for the broader cloud computing and cybersecurity landscapes. Queries directed to both the FTC and Microsoft regarding further details of the investigation have gone unanswered.

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