Feds Probe Microsoft Over Merger Actions

The Federal Trade Commission is investigating Microsoft in a series of investigations that will examine whether the company’s business practices violate antitrust laws, according to people familiar with the matter. In recent weeks, FTC lawyers have been conducting interviews and setting up meetings with Microsoft’s competitors.

One of the most interesting things is how the world’s top software companies are developing popular products in Office along with cybersecurity and cloud computing services, said one of the people, who asked not to be named to discuss privacy issues.

This connection was a matter of A recent study by ProPublicawhich detailed how, starting in 2021, Microsoft used the practice to increase its business with the US government while boxers participated in lucrative government contracts.

At the time, most government employees used a software license that included the Windows operating system and products such as Word, Outlook and Excel. After several cyber attacks, Microsoft offered to upgrade the license bundles for free for a limited time, giving the government access to its most advanced cyber security tools. The company also provided consultants to implement the upgrades.

Many government agencies agreed, including all of the military in the Department of Defense — and then began paying for the jobs raised after the trial. Former sales leaders involved in the project compared it to a drug dealer who lures users in with free samples, because they know that federal customers will be effectively locked out once they are established. Microsoft’s offering not only chased down other existing cybersecurity vendors but also took market share from cloud providers like Amazon Web Services, as the government began using products that run on Azure, Microsoft’s cloud platform.

Some experts told ProPublica that the company’s tactics may have violated antitrust laws, and the news agency reported that even some of Microsoft’s lawyers had concerns about their actions.

Microsoft said its offering was “designed to avoid untrustworthy concerns.” “The company’s goal at this time was to support the Government’s urgent request to strengthen the security of government agencies that are constantly being monitored by national threats,” Steve Faehl, head of security for Microsoft’s federal business, told ProPublica.

Some of the incidents were caused by Microsoft’s security flaws. As ProPublica reported in June, Russian government-sponsored hackers at the so-called SolarWinds they exploited a weakness in a Microsoft product the theft of classified information from the National Nuclear Security Administration and the National Institutes of Health, among the victims. Years before the attack was discovered, Microsoft engineers warned product leaders about the flaw, but they refused to address the issue for fear of alienating the government and losing the advantage to competitors, ProPublica reported.

Even if the engineer’s proposed fix would have kept customers, it would have created a “rush” for users accessing their devices. The addition of such “controversy” was unacceptable to the managers of the product group, which at the time was a serious conflict with competitors in the market known as identification devices, the newspaper said. These tools, which ensure that users have permission to access cloud applications, are important to Microsoft’s business because they often lead to the need for other cloud services.

According to a person familiar with the FTC investigation, one such tool, Entra ID, formerly known as Azure Active Directory, is another target of the agency’s investigation.

Microsoft has defended its decision to deal with the SolarWinds issue, telling ProPublica in June that the company’s review included “multiple reviews” at the time and that its response to security concerns was based on “customer disruption, usability, and existing mitigations.” It has promised to put security in place. more than anything else.”

The FTC considers Microsoft to have won many government contracts despite leaving the government vulnerable to fraud as an example of the company’s market power, a person familiar with the investigation told the news agency.

The committee is not the only one with this opinion. “These guys are kind of ‘too big to fail,'” said Sen. Ron Wyden, the Oregon Democrat who chairs the Senate Finance Committee and a longtime critic of Microsoft. “I think it’s time to increase domestic protections, to deal with antitrust abuses.”

The FTC’s investigation of Microsoft, which was first reported by a Financial Times and Bloombergit is far from the company’s first brush with federal regulators in antitrust matters. More than 20 years ago, the Department of Justice sued the company for dishonesty that led to its bankruptcy. Federal prosecutors alleged that Microsoft maintained an illegal monopoly on the operating system market by using anti-competitive practices that prevented competitors from gaining access. In the end, the Department of Justice settled with Microsoft, and a federal judge approved a enabling law which set restrictions on how a company could develop software and license it.

John Lopatka, former FTC counsel now he teaches of antitrust law at Penn State, told ProPublica that Microsoft’s recent disclosures about the media organization followed “a well-known trend”.

“It’s similar to the Microsoft problem” from decades ago, said Lopatka, who co-authored a book on the subject.

In this new investigation, the FTC has sent Microsoft to conduct a public investigation, a type of subpoena, to compel the company to provide information, people familiar with the investigation said. Microsoft confirmed that it received the document.

Company spokesman David Cuddy would not comment on the investigation but said the FTC’s demands “are broad, broad, and ask for things that are impossible to make sense of.” He refused to provide samples from the register. The FTC declined to comment.

The agency’s investigation follows a public comment period in 2023 where it sought information on business opportunities offered by cloud computing. After that, the FTC said it was interested in whether “of course businesses are hindering competition. “

The latest demands on Microsoft represent one of FTC Commissioner Lina Khan’s last stints as chair, and the investigation appears to be gaining momentum as Biden’s presidency winds down. But the new leadership of the organization will decide the future of the research.

President-elect Donald Trump said this month that he would nominate Commissioner Andrew Ferguson, a Republican lawyer, to lead the commission. After the announcement, Ferguson he said in writing on X“At the FTC, we will end Big Tech’s anti-competitive practices and free speech. We will ensure that America is the world’s technology leader and the best place for innovators to bring new ideas. “

Trump also said he would nominate Republican attorney Mark Meador as commissioner, describing him as a judge “antitrust enforcer” who previously worked at the FTC and the Department of Justice. Meador is a former aide to Sen. Mike Lee, the Utah Republican who introduced legislation to ban Google.