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The Federal Trade Commission is investigating Microsoft in a wide-ranging investigation into whether its business practices violate antitrust laws, people familiar with the matter said. In recent weeks, FTC lawyers have been interviewing and arranging meetings with Microsoft’s competitors.
How the world’s largest software provider will package its popular Office products with cybersecurity and cloud computing services, said one of the people, who requested anonymity to discuss the matter. is one of the key areas of concern.
This so-called bundling is the subject of a recent ProPublica investigation, which found that starting in 2021, Microsoft has used the practice to significantly expand its business with the U.S. government, while also undermining its competitors. It details how he was barred from lucrative federal contracts.
At the time, many federal employees were using the Windows operating system and software licenses that included products such as Word, Outlook, and Excel. In the wake of several devastating cyberattacks, Microsoft is offering free upgrades to these license bundles for a limited time to give governments access to the company’s more advanced cybersecurity products. The company also provided consultants to install the upgrade.
A wide range of federal bureaucracies, including all military services in the Department of Defense, accepted and began paying for those enhanced services once the free trial ended. Former sales leaders involved in this effort knew that once the upgrade was installed, federal customers were effectively locked into it, and drug dealers used this to scam users with free samples. I compared it. Microsoft’s offer has not only displaced some existing cybersecurity vendors, but also from cloud providers such as Amazon Web Services, as governments have begun using products that run on Microsoft’s own cloud platform, Azure. took market share.
Some experts told ProPublica that the company’s tactics may violate laws regulating contracts and competition, and the news outlet reported that even some of Microsoft’s lawyers have not discussed the deal. It was reported that the company had concerns regarding antitrust laws.
Microsoft said its proposal is “structured to avoid antitrust concerns.” Steve Faehl, security leader for Microsoft’s federal business, said, “The company’s only goal during this period is to help the government strengthen the security posture of federal agencies, which continue to be targeted by sophisticated nation-state threat actors. “This was to support an urgent request from the government.” he told ProPublica.
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Some of these intrusions were the result of Microsoft’s own security flaws. As ProPublica reported in June, in the so-called SolarWinds attack, Russian state-backed hackers exploited weaknesses in Microsoft products to steal sensitive data from victims including the National Nuclear Security Administration and the National Institutes of Health. Years before the attack was discovered, Microsoft engineers warned product leaders about the flaw, which they feared would alienate the federal government and displace them to competitors, ProPublica reported. The company reportedly refused to address the issue.
The engineers’ proposed fixes would keep customers safe, while also providing “speed increases” for users logging on to their devices. Adding such “friction” was unacceptable to product group managers who at the time were competing fiercely with competitors in the so-called identity tools market, the news outlet reported. These tools are important to Microsoft’s business strategy because they ensure that users have the right to log on to cloud-based programs, which often leads to demand for Microsoft’s other cloud services.
One such identity product, Entra ID (formerly known as Azure Active Directory), is another focus of the FTC investigation, according to people familiar with the FTC investigation.
Microsoft has defended its decision not to address SolarWinds-related flaws, telling ProPublica in June that its ratings included “multiple reviews” at the time and that the company’s response to security issues was “potentially based on significant customer confusion, exploitability, and available mitigations.” ” has promised to put security “above all else.”
The Federal Trade Commission said Microsoft won more federal business even as it left the government vulnerable to hacking, people familiar with the investigation told news outlets. The company considers this fact to be an example of a problem with the company’s influence on the market.
The committee is not alone in this view. “They’re kind of ‘too big to fail,'” said Sen. Ron Wyden, an Oregon Democrat who chairs the Senate Finance Committee. “I think the time has come to address antitrust violations and strengthen the role of the antitrust side.”
The FTC investigation into Microsoft, first reported by the Financial Times and Bloomberg, is not the company’s first confrontation with federal regulators over antitrust issues. More than 20 years ago, the Justice Department sued the company in a landmark antitrust case that nearly bankrupted it. Federal prosecutors alleged that Microsoft maintained an illegal monopoly in the operating system market through anticompetitive practices that hindered the foothold of competitors. Ultimately, the Justice Department settled with Microsoft, and a federal judge approved a consent decree imposing restrictions on how the company develops and licenses software.
John Lopartka, a former FTC adviser who now teaches antitrust law at Penn State University, told ProPublica that Microsoft’s actions detailed in recent news reports are “a very familiar pattern.” He said he was following.
Lopatka, who co-authored a book about the case, said it “reflects the Microsoft case” from decades ago.
In the new investigation, the FTC has sent Microsoft a civil investigative demand, a type of subpoena, to compel it to hand over information, people familiar with the investigation said. Microsoft confirmed receipt of the document.
Company spokesman David Cuddy would not comment on the details of the investigation, but said the FTC’s requests were “broad and require more than is even logically possible.” Ta. He declined to provide any examples on record. The FTC declined to comment.
The agency’s investigation followed a 2023 public comment period that sought information about cloud computing providers’ business practices. When it reached its conclusion, the FTC said it had an ongoing interest in “whether certain business practices inhibit competition.”
Microsoft’s ‘free’ plan to upgrade government cybersecurity was designed to drive profits by eliminating competitors, insiders say
The latest demands against Microsoft represent one of FTC Chairwoman Lina Khan’s final acts as chair, and the investigation appears to be gaining momentum as the Biden administration comes to an end. But the committee’s new leadership will decide the future of the investigation.
President-elect Donald Trump announced this month that he would promote Republican attorney general Andrew Ferguson to director general. Following the announcement, Ferguson wrote in a post on X: “At the FTC, we will end Big Tech’s vendetta against competition and free speech.” We affirm that America is the world’s technology leader and the best place for innovators to bring new ideas to life. ”
President Trump also said he would nominate Republican lawyer Mark Meador, describing him as an “antitrust enforcement officer” who previously worked at the FTC and the Justice Department. Meador is also a former aide to Utah Republican Sen. Mike Lee, who introduced the Google breakup bill.
Doris Burke contributed to the research.
