The FTC’s Microsoft antitrust probe reportedly focuses on software bundling

The Federal Trade Commission (FTC) is reportedly investigating Microsoft like it’s 1998. In the waning days of the Biden administration, outgoing chair Lina Khan’s probe is said to be picking up steam, according to ProPublica. The FTC is particularly concerned with Microsoft’s bundling of ubiquitous Office products with cybersecurity and cloud computing services. That includes a deal to upgrade government bundles for a limited time, which essentially had the effect of using a government cybersecurity crisis to sell more licenses.

It adds more detail to reports from Bloomberg and the Financial Times in November about an FTC probe into the Windows maker. The publications said Microsoft’s competitors complained that its bundling of its popular software with cloud services made it harder to compete. ProPublica says FTC attorneys have recently interviewed and scheduled meetings with Microsoft’s competitors.

Microsoft confirmed to ProPublica that the FTC issued a civil investigative demand (essentially a subpoena), forcing the company to hand over information related to the case. A Microsoft spokesperson told the publication — without providing on-the-record examples — that the FTC document is “broad, wide ranging, and requests things that are out of the realm of possibility to even be logical.”

The investigation follows a separate ProPublica report from November about how Microsoft appeared to exploit a series of cyberattacks to sell more licenses to the US government. Following a meeting with President Biden in the summer of 2021, the company was said to have offered to upgrade the government’s existing bundles (including Windows and its Office suite) to a more expensive version that added its advanced cybersecurity products. Microsoft also sent consultants to install the upgrades and train employees to use them.

Many divisions of the US government accepted — including all of the Defense Department’s military services — and then began paying for the more expensive bundles after the trial ended. (The hassle of switching to a different cybersecurity product after the trial ended practically guaranteed that would be the case.) ProPublica’s account essentially paints Microsoft as exploiting a cybersecurity crisis to expand sales and pad its bottom line. Just late-stage capitalism things, y’all.

Ironically, the sales tactic resulted from security lapses from — you guessed it — Microsoft. Biden’s request from Big Tech leaders to boost government cybersecurity followed the SolarWinds attack that exploited a vulnerability in a Microsoft identity service. The company reportedly knew the app contained a “security nightmare” that let hackers spoof legitimate employees and probe sensitive information without raising suspicion. But patching the flaw would add friction to government logins when the company was competing for US contracts. Microsoft reportedly opted to stay mum instead of risk losing business.

According to experts who spoke to ProPublica, the government trial sales scheme could have violated regulations on contracting and competition. The publication reported that even Microsoft’s attorneys worried the deal would spark antitrust concerns.

If this sounds familiar, it echoes the government’s 1998 antitrust lawsuit against Microsoft. Bundling was also a star of that show, with the FTC accusing the company of engaging in anticompetitive practices by including Internet Explorer with Windows, a move viewed in those early days of the internet as stifling rivals like Netscape.