FTC to probe Microsoft over cloud deals after antitrust complaints

The U.S. Federal Trade Commission is preparing to investigate Microsoft’s cloud computing business, according to multiple reports Thursday.

The Financial Times first reported the FTC was focusing on the Redmond-based tech giant’s productivity software, Microsoft 365, following up on allegations that the company effectively locked customers into Microsoft’s Azure cloud service. The Washington Post later reported the agency is preparing to send a demand for documents and records from Microsoft.

The suite of programs sold under Microsoft’s productivity banner brings in more than 40% of the company’s revenue.

From July through September, Microsoft reported over $28.3 billion in revenue from its “productivity and business processes” umbrella, which includes Microsoft 365 commercial and consumer products, according to a regulatory filing. It also reported $16.5 billion in profit for that segment.

For businesses looking to outfit their workforce with products like Teams, Word, Excel and Outlook, monthly prices can run from $6 to $22 per user. Microsoft also offers a $20 per user add-on for Copilot, the company’s artificial intelligence-powered service.

People with direct knowledge of the probe reportedly told The Financial Times that allegations against Microsoft include licensing terms from the company that slapped fees on customers who tried to move data from Azure to a competitor’s cloud service. There were also accusations that Microsoft made its products incompatible with other cloud services to prevent customers from defecting to other cloud providers, like Google.

Microsoft and the FTC declined to comment.

The probe would be the latest regulatory scrutiny against Big Tech from FTC Chair Lina Khan. Microsoft already faced a challenge from the FTC under Khan’s leadership targeting its acquisition of video game publisher Activision Blizzard, a $69 billion deal that was one of the largest in tech history.

More than a year after the company announced in January 2022 that it planned to acquire Activision Blizzard, the FTC sued to block merger. A federal judge eventually dismissed the FTC’s attempt and Microsoft closed the sale in October 2023.

The FTC is also in the middle of an antitrust action against Amazon. The agency accused the online retail giant of engaging in unfair methods of competition and maintaining a monopoly.

A federal judge dropped a few of the claims in the suit that were related to certain state laws but the thrust of it will move forward and could go to trial.

In the case against Amazon, the FTC accused Amazon of pushing steep fees onto third-party sellers to maintain prominent placement on its website and preventing those sellers from offering lower prices on competing sites.

Facebook owner Meta will have to face a trial in which the FTC is trying to break up the company over its dominance among social media platforms and how it obtained the market share. The FTC suit claims Meta, then Facebook, bought the social media app Instagram in 2012 and the instant messaging service WhatsApp in 2014 to quash rising social media competition.

Google has also been caught in the recent antitrust push by tech regulators.

In August, a federal judge ruled that Google had been illegally exploiting its search engine dominance to squash competition and stifle innovation, issuing what The Associated Press described as “a seismic decision that could shake up the internet and hobble one of the world’s best-known companies.”

Siding with the Justice Department after reviewing reams of evidence that included testimony from top executives at Google, Microsoft and Apple, U.S. District Judge Amit Mehta issued a ruling stating in part that “Google is a monopolist, and it has acted as one to maintain its monopoly.” He said Google’s dominance in the search market is evidence of its monopoly.

The impact of that decision and the recent FTC actions may not be clear for years.

This report includes information from The Associated Press and other Seattle Times wire services.