Why Microsoft avoided antitrust scrutiny that plagued other tech giants in 2021

Asia's Tech News Daily

The Big Tech reckoning gained momentum in 2021, as U.S. regulators accused behemoths like Google and Facebook of abusing their market power to gain an illegal edge over competitors.

But one major name in tech avoided not only the ire of the public but also the reach of antitrust regulators in 2021: Microsoft (MSFT), Yahoo Finance’s Company of the Year and the second-largest company in the U.S. by market capitalization after Apple (AAPL).

Microsoft is indisputably a giant even among its massive peers. It has the world’s dominant desktop operating system in Windows and is second in cloud market share behind Amazon (AMZN); it also owns the planet’s biggest professional network, LinkedIn, and Slack rival Microsoft Teams.

So, why haven’t antitrust regulators pursued Microsoft recently? To be an illegal monopolist, a company has to have a dominant market share and engage in anti-competitive practices. And several antitrust experts say they just haven’t seen signs that Microsoft has violated antitrust law. Perhaps Microsoft learned its lesson from an epic antitrust lawsuit the Justice Department filed nearly 25 years ago. Since then, Microsoft has gotten bigger — but it appears to be playing by the rules.

“Size does not make any difference. We don’t go after firms because of their large size,” Herbert Hovenkamp, one of the world’s leading antitrust scholars, told Yahoo Finance. “For example, Walmart is bigger than Amazon, but nobody is talking about major public antitrust litigation against Walmart.”

Later, Hovenkamp added, “You have got to identify some product where there is both dominance and an exclusionary practice and it’s kind of hard to find one [with Microsoft]. That’s, I think, the bottom line.”

The antitrust war against the rest of Big Tech

The same cannot be said of other tech giants, if antitrust claims against them are true.

Google (GOOG, GOOGL) has the biggest target on its back: The search and advertising giant faces three pending antitrust lawsuits from state attorneys general and one from a coalition of AGs and the Justice Department. The latest government lawsuit, filed in July, targets Google’s app store, Google Play. The others focus on Google’s massive search and search advertising business: When the Justice Department filed its suit in October of last year, then-Attorney General Bill Barr called the company “the gatekeeper of the internet.”

Google CEO Sundar Pichai testifies during a remote video hearing in Washington, U.S., March 25, 2021. U.S. House of Representatives Energy and Commerce Committee/Handout via Reuters

Meanwhile, Facebook parent Meta Platforms (FB) is still defending itself against claims from the Federal Trade Commission that it scoops up rivals like Instagram and WhatsApp to destroy its competition.

For its part, Amazon got hit with an antitrust suit from the Washington, D.C. attorney general in May, while the FTC is considering whether to block its $8.45 billion acquisition of movie studio MGM. Even Apple, which is less maligned than other tech giants, reportedly faces an imminent antitrust lawsuit from the Justice Department over its control of the iPhone.

In antitrust cases such as these, the government may begin an investigation because competitors or customers sound the alarm over allegedly anti-competitive behavior. For example, “Fortnite” maker Epic Games sued both Apple and Google over their app store fees; meanwhile, Yelp waged a years-long campaign to get antitrust regulators to go after Google.

“The victims of anti-competitive behavior are not lying on the ground outside of a building. It’s not like street crime. They have to come into the enforcement agencies and complain or else the enforcement agencies don’t really know about it,” said Harry First, co-director of the Competition, Innovation, and Information Law Program at NYU Law.

Microsoft’s CEO Satya Nadella speaks at the Viva Tech start-up and technology summit in Paris, France, May 24, 2018. REUTERS/Charles Platiau TPX IMAGES OF THE DAY

In the case of Microsoft, experts said they haven’t seen evidence that competitors have complained of antitrust violations. One exception is Slack, which filed an antitrust complaint in the EU claiming Microsoft unfairly bundled Microsoft Teams into its “market dominant” Office productivity suite. Still, that case appears to be an outlier.

“Microsoft simply may be maintaining its market share by being a good competitor,” says John Lopatka, an antitrust expert and professor at Penn State Law.

‘Emboldened by success and wealth’

The Justice Department accused Microsoft of being a bad competitor back in 1998. That’s when the U.S. sued the company for allegedly engaging in a “broad pattern of anticompetitive conduct.” The case focused largely on Microsoft’s Internet Explorer browser, which it bundled into Windows for free — arguably at the expense of competing browsers like now-defunct Netscape.

Then-Microsoft CEO Bill Gates didn’t appear to help the case with an evasive deposition where he reportedly declined to answer many of the government’s questions. Stephen D. Houck, then a federal prosecutor in New York, compared Gates and other executives to arrogant professional athletes, The New York Times reported in 1998.

“Emboldened by success and wealth, Microsoft executives felt they could break the rules with impunity,” he reportedly said.

404302 04: Microsoft Corp. Chairman Bill Gates arrives at U.S. District Court with his wife Melinda April 22, 2002 in Washington, DC. Gates is taking the witness stand to give his first live testimony since the antitrust case was filed against the software giant in 1998. (Photo by Alex Wong/Getty Images)

The dispute dragged on for nearly five years, until 2002, when a judge signed off on most of a settlement between Microsoft and the Justice Department. As part of that deal, Microsoft agreed to make it easier for consumers to use rival software on Windows computers, among other concessions.

Microsoft has, it seems, followed both the letter and spirit of that settlement. For years prior to that settlement, the company had resisted opening up its software to other devices, as my colleague Dan Howley reports. But now it pushes to make its software available on other hardware — and vice versa.

“The Windows Operating System is absolutely open. It’s like a bazaar. … Microsoft doesn’t limit choices the way that Apple does in the App Store,” says Hovenkamp, the antitrust scholar.

Microsoft appears to have learned its lesson after fighting a costly antitrust battle often mentioned in the same breath as Standard Oil or AT&T. The years-long case, tough as it was for the company, was crucial for its development, Microsoft President Brad Smith said in 2008, a decade after the trial.

“When I look back at it from Microsoft’s perspective, it did mean many things, but I also think when I try to prioritize it in my own mind, it meant one thing more than any other,” he said in a speech at Harvard University. “It was a part of the maturing of Microsoft.”

Erin Fuchs is deputy managing editor at Yahoo Finance.

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