For more than a year, Microsoft Corp. avoided Congress’ antitrust scrutiny with a deft strategy, but the software giant now finds itself the target of rivals’ anger for its finger-pointing tactics.
Much to the exasperation of Apple Inc. AAPL and Google parent Alphabet Inc. GOOGL GOOG, Microsoft MSFT and its president, Brad Smith, has publicly supported antitrust actions against them to gain a competitive advantage, sources close to both companies told MarketWatch. This prompted Apple’s vocal criticism of Microsoft during the Epic Games Inc.’s antitrust trial against the iPhone maker.
Now, insiders at Google, Amazon.com Inc.
and Facebook Inc.
are increasingly claiming Microsoft has hypocritically presented itself as the White Knight of tech, unsullied by the anticompetitive behavior of Big Tech. All four companies under federal investigation — Alphabet, Amazon, Apple, and Facebook — declined to speak on the record. But representatives from all four emphatically made it clear to MarketWatch that Microsoft is overplaying the antitrust card to make up ground in key technology areas such as mobile and gaming where Microsoft has lagged behind its rivals.
The strategy has worked swimmingly: Microsoft topped $2 trillion in market value last week, joining Apple in the exclusive club while generally dodging the attention of antitrust investigations, a new package of Congressional bills, and lawsuits.
“Microsoft is the original bad actor,” civil liberties attorney Shahid Buttar told MarketWatch, echoing the gripes of Microsoft’s rivals. “It’s pretty laughable, considering what they’ve said about antitrust the past year. This is beyond cynical.”
Microsoft’s diversionary tactics were called into question last week during markup of a package of sweeping antitrust bills designed to rein in Big Tech. Rep. Thomas Massie, R-Ky., claimed on the House floor that an early draft of the bills that would have covered Microsoft was rewritten to have the company carved out. Original versions of the draft bills, he pointed out, defined “online platform” as including “operating systems” while the amended versions that were introduced and approved define “online platform” to only include “mobile operating systems.”
This would mean Windows is not a covered platform under the bills. Earlier drafts also included a much lower total of monthly active users (500,000) to be a target of the bill, but it was raised to 50 million, which would exclude Microsoft’s Xbox videogame console. (The bills target companies based on the definition of a “covered platform” with 50 million MAUs or 100,000 monthly active business users run by a company with a market cap of more than $600 billion.)
“I’m trying to figure out why one of the big offenders of Big Tech has mysteriously evaded the scrutiny of this committee,” Massie said. “I’m talking about Microsoft… How is it not covered by these bills?”
A spokesman for Massie declined to comment further.
On Thursday, the House Judiciary Committee passed the final piece of its Big Tech antitrust package. The six bills include one that severely limits acquisitions of competitors, and another that could force Facebook to cleave Instagram and WhatsApp from its holdings.
Reaction from the other four members of Big Tech was quick and furious. The prevailing theme is that Microsoft — the focus of a major Justice Department investigation in the 1990s and early 2000s — is presenting itself as a “good monopolist,” in the words of one executive.
Learning from history, Microsoft — pilloried by rivals during its antitrust battle with the Justice Department in the 1990s and early 2000s — has weaponized the same issue this time around as part of a “master chess strategy,” as one former Microsoft exec now working at a Big Tech rival told MarketWatch.
Rep. David Cicilline, chairman of the House subcommittee that oversees antitrust, emphatically denied any bill was changed to exclude Microsoft and that the company did not have access to early copies.
“We shared drafts of bills throughout the investigation with people who participated in the investigation to get their feedback,” Cicilline said last week. “That happened all throughout the investigation and the drafting. So, they were shared with all of the people participating investigation.” (“I don’t know whether Microsoft would meet the test that is set forth in these five bills,” Cicilline told Axios on its Re:cap podcast on June 17.)
Cicilline did not respond to email messages seeking additional comments on the changes, and on his political contributions of more than $5,000 from Microsoft President Brad Smith. Cicilline said he has “sworn off” tech donations since his subcommittee first began its investigation in 2019. He took $1,000 this year from Glover Park Group, which counts Apple as one of its major clients. Apple does not have a corporate PAC.
Smith is a key strategist and frontman in Microsoft’s concerted campaign, and has effectively put the other four tech giants on their heels. For more than a year, Smith has publicly pointed figures at them, while making the case that the software giant is a good corporate citizen.
“When you create technology that changes the world, you have to assume a responsibility for the world that you’ve helped to create,” Smith told Nikkei in December 2020.
In April 2021, Smith renewed his attacks on Google over web content after urging antitrust bodies to review Apple’s App Store a year ago.
Shortly after the bills were introduced on June 11, Smith told Bloomberg three days later: “I think in many ways where this is going is a particular focus on technology platforms that serve as gatekeepers. In other words, they not only serve as a platform like an operating system, but people need to go through them to sell their commerce whether it’s a product that’s on Amazon or an app say in the Apple App Store or through a service like Google search. And I think that’s where we’re going to see more and more government focus.”
“Well, there are aspects of the legislation that was introduced in the house last week that absolutely applies to Microsoft and many other companies,” he later acknowledged to Bloomberg. “I think for all of us, it’s the time to step back, try to think broadly, look beyond ourselves and ask, what’s the right role of technology to serve the economy, our customers, the country, and the world?”
Additionally, Microsoft supports the European Union’s Digital Markets Act, which would require companies like Amazon, Apple, and Google with large numbers of customers to open their platforms to competitors such as Microsoft. Apple Chief Executive Tim Cook has argued the law would force Apple to permit side-loading apps on the iPhone, which is manually installing software from the internet or a file instead of through an app store. This, in turn, would wreak havoc on the privacy and security of consumers — not to mention expose them to ransomware and malware, he said.
At least one defender of Microsoft — Gus Rossi, who leads tech policy and advocacy at Omidyar Network — said the criticisms conveniently overlook that Microsoft was subject to the “last relevant antitrust investigation” 30 years ago.
“Its rivals have never been exposed to the scrutiny that Microsoft experienced years ago, and now they are trying to adapt,” Rossi told MarketWatch. “They are reacting as Microsoft did in the ’90s. It not only survived, but is a smarter company, policy-wise.”
For its part, Microsoft insists it did not lobby to be excluded from the new antitrust package. “The bills as proposed extends to all operating systems. While this may encompass Windows, which has more than 50 million daily active users, it already operates as an open platform that provides broad choice and opportunity to developers and consumers today,” a Microsoft spokesperson told MarketWatch.
The Smith-led antitrust offensive has earned behind-the-scenes rebukes from the other four members of the Big Tech pantheon, prompting one Apple exec to observe deep antagonisms that now fester between the two companies. Microsoft is also at loggerheads with Amazon, whom it beat out in a bid for a $10 billion cloud-computing contract with the Pentagon in 2019. Amazon is fighting the awarded contract in court.
Microsoft’s antitrust crusade has drawn incredulous responses from those who closely follow antitrust developments in the corridors of tech.
Microsoft hovered on the periphery of the Epic Games’ antitrust lawsuit against Apple last month, with at least five witnesses with links to Microsoft testifying on behalf of Epic. That was as many witnesses as from Epic itself. What is more, Microsoft shielded itself from discovery in litigation by not appearing as a party or sending a corporate representative to testify. Lori Wright, vice president of business development at Microsoft, testified in a personal capacity.
Microsoft is not entirely free of antitrust concerns. In July 2020, Slack Technologies
a provider of chat software for businesses, filed a complaint against Microsoft in the European Union, alleging that the company’s bundling of rival product Microsoft Teams with the widely used Office suite of business software was an anticompetitive abuse of its market power. Slack has agreed to be acquired by Salesforce.com Inc. CRM for $27.7 billion.
This article has been updated.