How Microsoft became a Big Tech choirboy

The US Federal Trade Commission (FTC) and the Department of Justice have aggressively targeted Big Tech, suing Meta, Google, Amazon, and Apple for antitrust violations. And it’s not doing so in a small way — it’s filed multiple law suits against Google, for example. In August, Judge Amit Mehta ruled the company violated antitrust law by actions it took to protect its search business. 

He was direct and blunt in his ruling: “Google is a monopolist, and it has acted as one to maintain its monopoly.” 

No decision has yet been made about what action will arise from the ruling. But the FTC could well recommend the nuclear option: Break up Google by forcing it to spin off parts or all of its search business.

That’s on the heels of other Big Tech suits. In March, the DOJ filed an antitrust suit against Apple, claiming the company has taken a variety of actions to make it more difficult for people from switch from their iPhones to competitors’ devices.

In 2020, the FTC sued Meta for antitrust violations, claiming Meta created a monopoly in social media when it bought Instagram and WhatsApp. There have been some twists and turns, but the suit still stands, though it hasn’t yet been brought to court. If the government prevails, it might try to force Meta to sell off Instagram and WhatsApp.

Just last month, Amazon got its turn when the FTC sued it for taking “interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”

Notice anything missing from that group? 

How about Microsoft, valued at more than $3 trillion and the world’s leading AI company? It’s true the FTC went after Microsoft when the company announced it was buying the gaming company Activision for $69 billion. But the feds lost that suit. And even if they had won, there’s a big difference between that fight and the ones against Meta, Google, Apple, and Amazon. Those lawsuits represent existential threats to the way the companies do business, possibly including breaking them up. The Activision suit, if successful, would only have stopped Microsoft from increasing its presence in gaming.

How has Microsoft managed to avoid being targeted? After all, the company has a virtual monopoly on desktop and laptop operating systems, is the global leader in AI, and has a massive presence almost everywhere in the tech world, from cloud computing to productivity software suites and beyond.

This didn’t happen by accident. Here’s how the onetime biggest shark in technology, a company that was set on its heels by an FTC suit decades ago, has managed to stay on the right side of the feds — at least so far.

Becoming the tech world’s choirboy

Back in 1998, Microsoft faced its own existential crisis: The DOJ sued it for illegally using its Windows monopoly to kill its competition. The company lost the lawsuit, and a judge ordered the company be broken up. After an appeal, in 2001 Microsoft and the DOJ reached an agreement in which Microsoft had to share code with other companies and had to allow non-Microsoft browsers access to Windows.

It was little more than a slap on the wrist. Despite that, the company went into a tailspin because it was so focused on defending itself rather than aggressively going after the mobile market, expanding into internet search, focusing on social media, or jumping into online retail.

When Satya Nadella became CEO of Microsoft in 2014, he was aware the FTC lawsuit had set the company on its heels. He determined to do whatever he could to avoid similar suits in the future. So, he changed the company’s old predatory culture and focused on technologies and behavior less likely to invite the wrath of regulators and law enforcement. 

What he did above all was focus on a variety of technologies, rather than a single one. And he did so without trying to gain a monopoly. For example, Nadella bet big on the cloud, growing the company’s cloud-based business and revenue dramatically. Amy Hood, executive vice president and chief financial officer of Microsoft, said of the company’s recent quarter, “Microsoft Cloud quarterly revenue of $36.8 billion, [was] up 21% (up 22% in constant currency) year-over-year.”

Microsoft also gets big revenue from Windows, its office suite, AI, gaming, and more. 

Key is that none of those technologies comes close to being a monopoly. Amazon is the leader in the cloud, not Microsoft. Thanks to iOS and Android, Microsoft doesn’t have a monopoly on operating systems. Google has a sizable office suite business, so Microsoft doesn’t have a monopoly there. And while Microsoft has become big in gaming, the courts have already ruled it doesn’t have a monopoly.

Google, Meta, Apple, and Amazon are each tied to technologies in which they have monopolies. It’s been their strengths — but with the FTC and DOJ targeting them, it could become their downfalls.

How about AI?

That’s not to say Microsoft will avoid government action forever. It wouldn’t be a surprise for the DOJ or the FTC to eventually go after it for its AI dominance. Not only is it now the largest AI company in the world, but it has deep ties to OpenAI, another dominant player in the field. 

At the moment, there’s plenty of competition, with Google, Meta, Apple, and Amazon jumping in, and with other large companies like Anthropic in the running. But if things shake out and Microsoft becomes the runaway leader, it might find itself in regulators’ crosshairs again.