Lina Khan, chair of the Federal Trade Commission, stated that her agency intends to investigate Microsoft for anticompetitive conduct in the cloud industry.
According to a recent ProPublica study, the government may have also been a target of anticompetitive conduct.
In the summer of 2021, a little more than a year after news came that the SolarWinds hack had compromised multiple government organizations, Microsoft promised to provide the government with $150 billion over the next five years to improve its digital security.
Normally, the federal government must buy services through a competitive bidding process, but the transaction terms were too tempting to pass up. According to ProPublica, Microsoft provided the government with free access to its G5 security capabilities for the first year, as well as experts to assist with product installation.
The catch was that once an agency committed to Microsoft’s services, it was effectively tethered to them. Microsoft charged hefty costs to users who wished to switch to a competitor. Microsoft’s sales representative told ProPublica that the goal was to “spin the meter” for Azure and help it acquire market domination over its competitor, Amazon.
Some legal experts believe the transaction crosses into tricky antitrust territory, particularly concerning regulations prohibiting free service agreements. These allow the federal government to receive services from other parties without remuneration. However, legal expert James Nagle, who specializes in federal contracting, told ProPublica that “this is not truly gratuitous.” There is another agenda in the works.
Others argue that the federal government should bear all of the accountability.
“What Microsoft did does not count as an illegal monopoly because the government could have switched to a different vendor,” Peter Cohan, associate professor of practice in management at Babson College, told Business Insider in an email.
“Arguably, the government should have let the cybersecurity contract out to other bidders rather than signing up for G5 after obtaining free consultancy services from Microsoft. Other cybersecurity companies may have bid to cover some or all of the government’s costs associated with switching from Microsoft to another vendor, who may have charged the government less than G5 prices.
Microsoft did not immediately react to Business Insider’s request for comment.
Steve Faehl, the company’s security leader for federal business, told 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.”