In the giant dog park of global government regulation, Microsoft is showing its belly.
What happens next remains to be seen. But the company’s recent response to scrutiny in the U.S. and Europe — generally acquiescing and in some cases outright agreeing with its critics — contrasts sharply with its strategy of the late 1990s, and with the defensive approach taken by some of its fellow tech giants today.
This is not to weigh in on whether Microsoft’s actions and intentions are pure. Its rivals including Google and Salesforce would respond with a resounding “no” to that. But it’s clear that this is a strategy learned by Microsoft after decades of pushing the envelope, and pushing back whenever it was challenged for going too far.
On two continents, this new strategy is now facing its biggest test yet.
Microsoft’s latest display of submission came on Tuesday, after the European Commission issued a statement of objections outlining its “preliminary view” that the company violated EU antitrust rules by bundling its Microsoft Teams communication and collaboration software with Office 365 and Microsoft 365.
This came despite Microsoft’s attempts to avoid formal action from the commission by unbundling Office and Teams starting in Europe and Switzerland last year, before expanding the approach globally this spring.
The commission’s preliminary finding this week was that the changes were “insufficient to address its concerns and that more changes to Microsoft’s conduct are necessary to restore competition.”
Under EU rules, Microsoft could ultimately be fined as much as 10% of its annual revenue, or nearly $22 billion based on its fiscal 2023 results of $211.9 billion in revenue, although it’s unlikely the fine would be that high.
This European case began with a complaint filed by Slack in 2020. That was one year before Slack’s acquisition by Salesforce, but the longtime Microsoft rival has gladly taken up the fight.
This is where Microsoft in its youth would have fought back.
But now approaching 50 years old, the company instead issued this statement from Microsoft President Brad Smith: “Having unbundled Teams and taken initial interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the Commission‘s remaining concerns.”
Microsoft is taking a similar approach to U.S. government scrutiny.
Testifying earlier this month on security issues before the U.S. House Homeland Security Committee, for example, Smith seemed to take Rep. Clay Higgins by surprise by agreeing with criticism of the company for not updating a blog post about a high-profile 2023 cyberattack for six months, leaving customers in the dark.
We’ve yet to see how things will play out in the U.S. Federal Trade Commission’s review of Microsoft’s AI investments and partnerships involving OpenAI, Inflection, and others. Microsoft has so far stood its ground on that front, which makes sense given the high stakes of the AI competition, and the early stages of that FTC inquiry.
But ultimately, the real lesson from Microsoft’s landmark U.S. antitrust case of the late 1990s was that any government remedy will likely do less to undercut the company than the distraction of baring its teeth in the meantime.
https://ift.tt/JNmIBiG June 26, 2024 at 03:11PM GeekWire
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