Microsoft Still Under Antitrust Scanner

Microsoft continues to be a prime target for antitrust action due to its dominant market positions and strategic business moves.

After widespread antitrust actions in the 1990s and 2000s, Microsoft is again under scrutiny by U.S. and European authorities.

Developments including Microsoft's acquisition of Activision Blizzard, bundling of Microsoft Teams, and the Xbox Game Pass price hike, have brought the tech giant back into the spotlight.

This raises the question: Why is Microsoft still at the center of antitrust action?

What Happened Back In The 1990s And Early 2000s

Back in the 90s, Microsoft faced significant antitrust scrutiny from the U.S. Department of Justice and the European Commission.

In 1998, Microsoft's bundling of Internet Explorer with the Windows operating system and other exclusionary practices led to a ruling that Microsoft had violated antitrust laws.

Although a proposed breakup was overturned, a settlement imposed various restrictions on the company.

Similarly, the European Commission's actions in the early 2000s focused on Microsoft's bundling of Windows Media Player and failure to provide interoperability information, resulting in record fines.

The European Commission also imposed several restrictions by way of regulations on the company to ensure the market remains competitive. One of these regulations even played a role in the recent CrowdStrike incident that took down 8.5 million computers worldwide.

What Are The Latest Developments

Activision Blizzard Acquisition: Microsoft's $68.7 billion acquisition of Activision Blizzard has been one of the most talked-about deals. Despite Microsoft being a smaller player than Sony in the gaming industry, the FTC raised concerns over the vertical integration of the two companies.

Bundling Of Microsoft Teams: Competitors argue that this bundling gives Microsoft an unfair advantage, stifling competition in the productivity software market. Authorities are particularly sensitive to actions that may hinder the growth of emerging technologies and competitors.

Xbox Game Pass Price Hike: The recent price hike of Xbox Game Pass has not gone unnoticed by the FTC. Price increases in services where Microsoft holds significant market power can be seen as an abuse of its dominant position, potentially harming consumers by reducing choices and increasing costs.

Microsoft’s Strategic Response

Microsoft's OpenAI Board Decision: Earlier this month, Microsoft gave up its observer seat on OpenAI’s board, a move speculated to be linked to antitrust concerns, according to Justin Teresi, Litigation and Policy Analyst at Bloomberg Intelligence.

"There's a possibility that this decision is related to reports that the FTC is probing Microsoft's investment in OpenAI,” Teresi told Benzinga.

However, the exact reasons remain speculative. Regardless, Microsoft retains a 49% stake in OpenAI, indicating its continued significant involvement in the AI space.

Poaching Talent: Microsoft brought in DeepMind and Inflection co-founder Mustafa Suleyman to lead its AI division. Suleyman also brought with him talent from Inflection AI to work alongside him at Microsoft.

Anurag Rana, Sector Head and Senior Analyst at Bloomberg Intelligence noted that tech companies, including Microsoft, are increasingly poaching talent instead of acquiring companies.

This strategy may be a response to heightened antitrust scrutiny.

"Tech companies are in a bind regarding acquisitions, leading to unique deals to acquire talent. So far, we have seen no big pushback from regulators, but it may happen down the road," Rana told Benzinga.

He also raises a critical point about the impact on smaller companies: "Buyout is a natural end to a start-up. If larger companies cannot acquire them, it may hinder their growth and innovation."

Is Microsoft Being Unfairly Targeted?

Authorities are focused on companies that dominate certain markets and engage in exclusionary conduct to maintain or attain monopoly status.

Given Microsoft's significant presence in various tech sectors, it naturally attracts regulatory attention.

“I don't really think one can characterize what the antitrust authorities are doing as being fair or unfair in focusing on Microsoft,” Jennifer Rie, Senior Litigation Analyst at Bloomberg Intelligence, told Benzinga.

"The FTC and Justice Department's Antitrust division have been scrutinizing the conduct of numerous powerful companies in various industries, so Microsoft is not being singled out," she added.

That's all for this week! If you found these updates useful, you'll like more from this newsletter. Get deeper dives, hot takes, and all the latest tech news delivered straight to your inbox.