FTC Investigates Microsoft for Anticompetitive Practices Targeting the Government

The FTC is launching an investigation into Microsoft’s alleged anticompetitive practices, some of which may have been directed at the U.S. government, according to a recent report by ProPublica.

ProPublica reports that in the summer of 2021, just over a year after the SolarWinds hack breached several government agencies, Microsoft pledged $150 billion to the government over five years to upgrade its digital security. The deal terms were hard to pass up, with Microsoft offering free access to its G5 security capabilities for the first year and consultants to help install the products, according to ProPublica.

However, the agreement came with a catch. Once an agency committed to Microsoft’s services, they were essentially locked in, with steep fees imposed on those who wanted to switch to a competitor. A Microsoft sales representative told ProPublica that the goal was to “spin the meter” for Azure and help it gain market dominance over its main rival, Amazon.

Legal experts are divided on whether the deal ventures into antitrust territory. Some believe it may violate laws against gratuitous service agreements, which allow the federal government to receive services from other parties as long as no compensation is involved. James Nagle, a legal expert specializing in the federal contracting process, told ProPublica, “This is not truly gratuitous. There’s another agenda in the works.”

Others argue that the blame should fall on the federal government for not putting the cybersecurity contract out for bid to other rivals. Peter Cohan, associate professor of practice in management at Babson College, told Business Insider, “What Microsoft did does not count as an illegal monopoly because the government could have switched to a different vendor.” He added that other cybersecurity companies could have bid to cover some or all of the government’s cost to switch from Microsoft to another vendor, potentially charging less than G5 rates.

However, Steve Faehl, Microsoft’s security leader for federal business, said in a statement to ProPublica that the company’s “sole goal during this period was to support an urgent request by the Administration to enhance the security posture of federal agencies who were continuously being targeted by sophisticated nation-state threat actors.”