German Antitrust Watchdog Intensifies Scrutiny on Microsoft's Market Dominance and AI Integration

Germany monitoring Microsoft for 'anti-competitive' practice

Wants to peer into gaps in DMA to keep Redmond honest in cloud and AI Germany plans to keep closer tabs on Microsoft to identify and "stop anti-competitive practices" that are not currently covered by the European Commission's Digital Markets Act (DMA), namely cloud computing and AI. The Bundeskartellamt began inspecting the US megacorp in March 2023 to determine whether it qualifies as a business of "paramount significance" under the German Competition Act, where the designation would give the federal cartel office powers to "intervene early and more effectively" if it identifies unfair behavior. Microsoft has qualified as such - meaning yet another antitrust watchdog is closely monitoring the way the company plies its trade. Andreas Mundt, president of the Bundeskartellamt, said in a statement to The Reg that Microsoft's products are "omnipresent in companies, authorities, and private households, and have become indispensable." He highlighted Windows, Office applications, and "many other software products" that are bundled together, tightening the company's grip on customers' wallets. "Today Microsoft's ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations." This comes just days after Google Cloud, which has repeatedly protested about the way Microsoft licenses its software in the cloud, issued a formal complaint to the European Commission to prevent its rival from dominating the cloud in the same way it does with on-premises software. Google claimed Microsoft charges four times more for customers to license on-premises software such as Windows Server in rival cloud infrastructure than with Azure, and pointed to a 2019 policy change that no longer allowed customers to run pre-purchased workloads on any hardware or cloud. The listed provider alteration effectively twisted customers' arms to choose Azure for reasons of costs, and restricted security updates on third-party clouds. Amit Zavery, vice president of Google Cloud, told us: Google leaned on McKinsey research that shows 70 percent of Windows Server workloads remain in customers' own datacenters, and is worried that as those migrate it will be easier, cheaper, and be seen as more reliable to do so with Microsoft. "That's when customers decide they need to be able to have a choice of where they want to move to and they should be able to pick any cloud provider which makes sense for them, technically and commercially." Zavery added: "We're asking the European Commission to act now." The exec was unsure if the Commission would look to launch a probe under the auspices of the DMA. "It's up to the Commission in terms of figuring out how they want to resolve it. Our hope is that whatever they choose is something which is fast and fixes the problem for the long term, for the market." This week, Mundt at the Bundeskartellamt also said its decision applies to the whole of Microsoft, not just individual products or services. "At the same time Microsoft is subject to the EU provisions applicable to gatekeepers under the Digital Markets Act. However, at this stage the resulting rules, which are enforced by the EU Commission, only apply to the Windows operating system and the LinkedIn network. Based on our decision we can stop anti-competitive practices which are not covered by the DMA." Germany-based Nextcloud filed a complaint with the Commission's antitrust division in November 2021 to lodge commercial grievances with the way Microsoft bundles products - this is what piqued the interest of local regulators. Founder and CEO Frank Karlitschek said: "Over the past three years, Nextcloud has submitted extensive documentation and other evidence of anti-competitive behavior by Microsoft. The Federal Cartel Office today determined that Microsoft has particular market power. This is an important step to prohibit future anti-competitive practices by the US company." So another front in the battle with regulators has opened up for Microsoft, which turned over $245 billion in the 12 months ended June 30 versus $211.9 billion in the prior financial year. The Intelligent Cloud division accounted for $77.7 billion of this sales haul. Microsoft has so far managed to shut down several local complaints in Europe, forging confidential settlements OVH Cloud, DCC, and Aruba S.p.a, and more recently with a trade body comprising 27 European cloud vendors. The UK's Competition and Markets Authority is probing Microsoft licensing, as is the Federal Trade Commission. The ever-expanding commercial waistline of Microsoft indicates that customers aren't concerned or have little option to go outside of that particular walled garden. A Microsoft spokesperson said: "We recognize our responsibility to support a healthy competitive environment and we will strive to be proactive, collaborative, and responsible in working with the Bundeskartellamt. Microsoft is partnering with Germany's most innovative companies, and we're committed to investing in the growth of its digital economy." ®

Microsoft Faces Closer Antitrust Scrutiny in Germany

German antitrust officials said they were placing Microsoft under closer surveillance to prevent the tech giant from engaging in any anticompetitive practices, the latest salvo from European regulators against U.S. big tech. The country's Federal Cartel Office said Microsoft would be subject to so-called special abuse control for five years after officials said the company was of paramount significance for cross-border competition. The measure allows German regulators to act early and prohibit companies from engaging in what they deem as anticompetitive behavior. "Today Microsoft's ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations," Andreas Mundt, president of the Federal Cartel Office, said in a statement. The watchdog cited the prominence of Microsoft's products across governments, businesses and households to justify its decision, singling out the Windows operating system, Office applications and Microsoft's investment in ChatGPT maker OpenAI. News Corp, owner of Dow Jones Newswires and The Wall Street Journal, has a content-licensing partnership with OpenAI. A Microsoft spokesperson said the group would strive to be proactive, collaborative and responsible in working with antitrust officials as it acknowledged its responsibility to support a health competitive environment. Microsoft is the latest U.S. tech giant to fall under closer surveillance in Germany after officials there also stepped up monitoring of Alphabet's Google, Facebook and Instagram owner Meta Platforms, Amazon.com and Apple. An appeal is pending at the Federal Court of Justice in the Apple case, but the watchdog said its decisions on Google, Meta and Amazon were final. Big tech has been facing heightened scrutiny across the European Union after the bloc passed sweeping digital-competition legislation such as the Digital Markets Act, which created a set of rules that sought to make it easier for officials to tackle antitrust concerns more quickly when some of the world's largest tech companies are involved. Under the DMA, companies that the bloc considers as gatekeepers must comply with rules aimed at boosting competition in digital advertising, online search and app ecosystems. Those found to be in breach of the law face fines of up to 10% of their global revenue, and which can rise to 20% in case of repeated infringement. Mundt said the decision from the German Federal Cartel Office would enable Germany to stop any anticompetitive practices that aren't covered by the DMA. "Our decision applies to Microsoft as a whole, not only to individual services or products," Mundt said.

Microsoft's Omnipresence Catches Eye of German Antitrust Watchdog | PYMNTS.com

Microsoft's size and scope has gotten the attention of Germany's antitrust regulator. The Federal Cartel Office announced Monday (Sept. 30) that it was placing the tech giant under closer scrutiny in the form of a five-year "extended abuse control" measure. The effort comes as Microsoft's products have become "omnipresent" and "indispensable" among businesses, consumers and organizations, Andreas Mundt, the cartel office president, said in the announcement. He cited things like the Windows operating system, its partnership with and investment in OpenAI and its involvement in the video game world thanks to the Xbox system. "Today Microsoft's ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations," Mundt said. When reached for comment by PYMNTS, Microsoft said it was cooperating with the watchdog. Mundt had warned earlier this year that the rise of advanced artificial intelligence (AI) tools had the potential to serve as a "first-class fire accelerator" for anticompetitive behavior among Big Tech companies such as Microsoft and Google, with the technology threatening to exacerbate existing issues. "AI will make all the problems only worse," Mundt said, expressing concerns that consumers might find it increasingly difficult to bypass Big Tech platforms in favor of alternative services. In related news, PYMNTS wrote last week about Microsoft's plans to restart the dormant Three Mile Island nuclear power plant in Pennsylvania to help meet its AI demand. It's a decision that "highlights the massive energy needs that come with scaling AI advancements," Labhesh Patel, CEO, and co-founder of Autonomys, a company developing decentralized AI infrastructure, told PYMNTS. "As AI systems become more integral to the economy and technological progress, their energy demands are rising." It's a partnership that could usher in a wave of similar agreements between Big Tech and energy companies, that report noted. Benjamin Lee, an engineering professor at the University of Pennsylvania, suggested that tech companies are embracing nuclear power as renewable energy struggles to address rising data center demands. "There is an increasing realization ... that renewable energy installations cannot keep pace with data center construction, raising questions about whether net zero is possible," Lee said.

Microsoft to face higher competition scrutiny in Germany, including over its use of AI | TechCrunch

Microsoft has joined an exclusive club of tech giants that are subject to a special abuse control regime in Germany. The country's Federal Cartel Office (FCO) confirmed on Monday that the software giant could face restrictions if the competition authority deems an intervention is necessary. The designation, which lasts for five years, is important, as it lets the German authority take a close interest in how Microsoft wields its influence through its activities around generative AI. However, the regulator said it has yet to take any decisions on "possible proceedings." In recent years, Microsoft's influence on OpenAI has landed the pair on antitrust regulators' radars. The cozy relationship even saw Microsoft briefly hire OpenAI front-man Sam Altman and other key staffers last fall during a board dispute. Although Altman ended up staying at OpenAI, the episode underscored the closeness between the two companies, and Microsoft even got a board observer seat at OpenAI (it gave it up this summer). However, careful structuring of their arrangement appears to have kept it flying for now. The FCO has already looked at the two companies' partnership, and it found last November that their relationship did not meet the threshold for a traditional merger review. However, now that the regulator is armed with more proactive and wide-ranging powers to regulate Big Tech, Microsoft's dealings with OpenAI could face closer scrutiny in Germany going forward. The FCO's press release highlights how Microsoft's Copilot AI assistant is used "in many parts" of its ecosystem. It also links the company's strength in cloud computing to helping it enter partnerships with "highly innovative suppliers," as it can "offer their AI models as services on Azure and integrate them into its own products." Commenting in a statement, Andreas Mundt, president of the FCO, also highlighted Microsoft's long history of software dominance, adding: "Today, Microsoft's ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations." The FCO began investigating whether the tech giant's market power met the bar for the special abuse controls regime back in March 2023. And this confirmation that the company has "paramount significance for competition across markets" unlocks a range of powers contained in the 2021 update to Germany's antitrust rulebook. The reform aims to counteract concerns that Big Tech's market power is hampering rivals' ability to innovate and compete. The German law already applies to Amazon, Apple, Google and Meta, and predates the European Union's Digital Markets Act (DMA), a similar ex-ante competition reform that is also being used to clip Big Tech's wings. However, the DMA applies operational controls only to named platforms, while the FCO has designated Microsoft as a whole. This means the German authority has greater freedom to impose controls on Microsoft's activities, including around AI, if it judges the company's actions are crimping competition. The EU's DMA was drafted before the boom in generative AI tools made ChatGPT a household name. Microsoft is designated as a gatekeeper, but only two of its platforms are directly regulated: the Windows operating system and its social network LinkedIn. That limits the European Commission's ability to intervene in Microsoft's activities in AI unless they specifically fall within these two "core platform services." "Our decision applies to Microsoft as a whole, not only to individual services or products," Mundt emphasized. "Based on our decision, we can stop anti-competitive practices which are not covered by the DMA." Microsoft spokeswoman Sophie Thomas said in an emailed statement: "We recognize our responsibility to support a healthy competitive environment and we will strive to be proactive, collaborative and responsible in working with the Bundeskartellamt [FCO]. Microsoft is partnering with Germany's most innovative companies, and we're committed to investing in the growth of its digital economy."