FTC probes Microsoft for antitrust breaches in cloud and AI markets

The US Federal Trade Commission has issued civil investigative demands to at least half a dozen of Microsoft’s competitors, initiating a probe into potential exclusionary conduct within the company’s Azure cloud services and artificial intelligence sector. The inquiry, which began in 2024 under the Biden administration and continues under President Donald Trump, examines licensing arrangements, bundling practices, and interoperability issues, raising the possibility of a legal complaint against the technology giant for the first time in over two decades.

Documents obtained by The Verge reveal that the civil investigative demands span more than 15 pages and contain over 15 questions with extensive sub-parts. The FTC is seeking to determine if Microsoft has employed unfair methods of competition in violation of the FTC Act, specifically regarding cloud, software products, and related services. Requests to competitors include organisational charts, business and marketing plans, product roadmaps, and detailed information on pricing, discounting, and profitability.

The investigation focuses on barriers to entry in markets where Microsoft operates and the impact of its policies on competition. References to artificial intelligence in the documents suggest the agency is investigating whether Microsoft’s AI offerings constitute an illegal tying arrangement or provide an unearned competitive advantage. This scrutiny follows a 2024 ProPublica report finding that Microsoft used free cybersecurity upgrades tied to Azure to gain a foothold in US government agencies, although government contracts were not among the topics disclosed in the civil investigative demands.

Microsoft has stated it is cooperating fully with the inquiry. Spokesperson Alex Haurek said the company believes its practices promote competition while delivering innovative products. He pointed to Google as a clear example of market dynamics, noting the rival’s 63 per cent year-over-year growth and head-to-head competition with major providers including Amazon Web Services. Microsoft insists there is ample competition in the cloud sector, which has helped push its valuation to historic highs and positioned it for the computing requirements of AI.

The probe has not been limited to the United States. Regulators in the European Union, the UK Competition and Markets Authority, and Japan Fair Trade Commission are also investigating Microsoft’s cloud services. Haurek stated that Microsoft is committed to working constructively with the UK authority and cooperating with investigations in Europe and Japan, describing the global cloud sector as dynamic and competitive.

The current FTC commission consists of two Republican commissioners, who could choose to end the investigation quietly without filing a complaint. However, should they approve a lawsuit, Microsoft may find itself facing scrutiny similar to the landmark 1998 Department of Justice complaint that accused it of illegally tying its Windows operating system to its Internet Explorer browser. While that case resulted in a settlement, it is widely credited with reining in Microsoft’s market power and allowing competitors to flourish.

Legal experts note that the totality of pending antitrust cases involving Big Tech will likely determine the direction of the information services sector. Microsoft has largely avoided the populist calls to break up major technology firms that have targeted peers such as Google, Meta, Amazon, and Apple. Its business-focused offerings and reputation for having a robust compliance program have helped it dodge some political enemies, though the company has already faced a government challenge regarding its acquisition of Activision Blizzard, which it ultimately prevailed in.