The US Federal Trade Commission has started an investigation into suspicions of monopoly in Microsoft's cloud and AI businesses, with the possibility of a policy shift under the new administration.

November 28, 2024

The U.S. Federal Trade Commission (FTC) has initiated a comprehensive antitrust investigation into Microsoft's software licenses, cloud computing, cybersecurity, and AI businesses, under suspicion of violating antitrust laws (similar to Japan's Antimonopoly Act). This investigation was launched with the approval of Chairperson Lina Khan, but with the incoming administration of President-elect Donald Trump, the direction of the investigation has become uncertain.

The FTC's investigation this time targets various aspects of Microsoft's business activities. The investigation was triggered by allegations from competing companies that the company is unfairly leveraging the market dominance of its cloud service Azure. Of particular concern are the punitive licensing conditions imposed when customers try to migrate data to competing platforms.

The specific content of the investigation has been formalized as an information request that spans hundreds of pages. This was created after over a year of unofficial discussions with Microsoft's competing and partner companies. The focus is on Microsoft's bundling sales of productivity enhancement software and security software with Azure Cloud, as well as its integrated strategy for AI products.
Of particular concern is the content of the allegations submitted by Google to the European Commission. According to Google, Microsoft is demanding a 400% price markup from customers running Windows Server on competing cloud services, and further limiting the provision of security updates. This issue is considered particularly important considering Microsoft's position as a major supplier of software and cloud services to U.S. government agencies.

The investigation also takes into account recent cyber security incidents related to Microsoft products. The Cyber Safety Review Board of the government has concluded that "Microsoft's security culture is inadequate, and particularly considering its central position in the technology ecosystem, a fundamental reassessment is necessary." In response, CEO Satya Nadella has issued a memo to employees stating "When faced with a trade-off between security and other priorities, the answer is clear: choose security."

Concerns about Microsoft's business practices are rapidly increasing in the cloud computing industry. Of particular note is the critical stance of the online business lobby group NetChoice, representing companies such as Amazon and Google. The group points out that Microsoft is seeking to further strengthen its dominant position in the productivity software and operating system markets through AI tool integration into core products like Office Suite and Outlook.
The seriousness of this issue is underscored by Microsoft's influence as the world's largest software company. Changes to the company's licensing terms could have wide-ranging impacts, from corporate IT spending to technology choices. Particularly in the cloud computing market, the issue of "vendor lock-in" is being highlighted, where once customers rely on a specific platform, transitioning to another platform becomes technically and economically challenging.

Among market analysts, various views are being expressed on the impact of this survey on the competitive environment of the cloud computing market. In particular, the competitive structure of the three major cloud providers - Microsoft Azure, Amazon AWS, and Google Cloud Platform - and how it may change due to regulatory intervention has attracted attention. Furthermore, cautious evaluations are also being made on the impact of this survey on companies' cloud strategies and AI development plans.