Although Fubo’s lawsuit against the JV appears to be settled, other rivals in sports television seemed intent on continuing to fight Venu.
In a January 9 letter (PDF) to US District Judge Margaret M. Garnett of the Southern District in New York, who granted Fubo’s premliminary injunction against Venu, Michael Hartman, general counsel and chief external affairs officer for DirectTV, wrote that Fubo’s settlement “does nothing to resolve the underlying antitrust violations at issue.” Hartman asked the court to maintain the preliminary injunction against the app’s launch.
“The preliminary injunction has protected consumers and distributors alike from the JV Defendant’s scheme to ‘capture demand,’ ‘suppress’ potentially competitive sports bundles, and impose consumer price hikes,” the letter says, adding that DirectTV would continue to explore its options regarding the JV “and other anticompetitive harms.”
Similarly, Pantelis Michalopoulos, counsel for EchoStar Corporation, which owns Dish, penned a letter (PDF) to Garnett on January 7, claiming the members of the JV “purchased their way out of their antitrust violation.” Michalopoulos added that the JV defendants “should not be able to pay their way into erasing the Court’s carefully reasoned decision” to temporarily block Venu’s launch.
In addition to Fubo, DirecTV, and Dish, ACA Connects (a trade association for small- to medium-sized telecommunication service providers) publicly expressed concerns about Venu. NFL was also reported to be worried about the implications of the venture.
Now, the three giants behind Venu are throwing in the towel and abandoning an app that could have garnered a lot of subscribers tired of hopping around apps, channels, and subscriptions to watch all the sports content they wanted. But they’re also avoiding a lot of litigation and potential backlash in the process.
John Lopatka, a former consultant to the FTC who now teaches antitrust law at Penn State, told ProPublica that the Microsoft actions detailed in the news organization’s recent reporting followed “a very familiar pattern” of behavior.
“It does echo the Microsoft case” from decades ago, said Lopatka, who co-authored a book on that case.
In the new investigation, the FTC has sent Microsoft a civil investigative demand, the agency’s version of a subpoena, compelling the company to turn over information, people familiar with the probe said. Microsoft confirmed that it received the document.
Company spokesperson David Cuddy did not comment on the specifics of the investigation but said the FTC’s demand is “broad, wide ranging, and requests things that are out of the realm of possibility to even be logical.” He declined to provide on-the-record examples. The FTC declined to comment.
The agency’s investigation follows a public comment period in 2023 during which it sought information on the business practices of cloud computing providers. When that concluded, the FTC said it had ongoing interest in whether “certain business practices are inhibiting competition.”
The recent demand to Microsoft represents one of FTC Commissioner Lina Khan’s final moves as chair, and the probe appears to be picking up steam as the Biden administration winds down. The commission’s new leadership, however, will decide the future of the investigation.
President-elect Donald Trump said this month that he will elevate Commissioner Andrew Ferguson, a Republican attorney, to lead the agency. Following the announcement, Ferguson said in a post on X, “At the FTC, we will end Big Tech’s vendetta against competition and free speech. We will make sure that America is the world’s technological leader and the best place for innovators to bring new ideas to life.”
Trump also said he would nominate Republican lawyer Mark Meador as a commissioner, describing him as an “antitrust enforcer” who previously worked at the FTC and the Justice Department. Meador is also a former aide to Sen. Mike Lee, a Utah Republican who introduced legislation to break up Google.
The FTC also highlighted fees charged on users transferring data out of certain cloud systems and minimum spend contracts, which offer discounts to companies in return for a set level of spending.
Microsoft has also attracted scrutiny from international regulators over similar matters. The UK’s Competition and Markets Authority is investigating Microsoft and Amazon after its fellow watchdog Ofcom found that customers complained about being “locked in” to a single provider, which offers discounts for exclusivity and charge high “egress fees” to leave.
In the EU, Microsoft has avoided a formal probe into its cloud business after agreeing to a multimillion-dollar deal with a group of rival cloud providers in July.
The FTC in 2022 sued to block Microsoft’s $75 billion acquisition of video game maker Activision Blizzard over concerns the deal would harm competitors to its Xbox consoles and cloud-gaming business. A federal court shot down an attempt by the FTC to block it, which is being appealed. A revised version of the deal in the meantime closed last year following its clearance by the UK’s CMA.
Since its inception 20 years ago, cloud infrastructure and services has grown to become one of the most lucrative business lines for Big Tech as companies outsource their data storage and computing online. More recently, this has been turbocharged by demand for processing power to train and run artificial intelligence models.
Spending on cloud services soared to $561 billion in 2023 with market researcher Gartner forecasting it will grow to $675 billion this year and $825 billion in 2025. Microsoft has about a 20 percent market share over the global cloud market, trailing leader Amazon Web Services that has 31 percent, but almost double the size of Google Cloud at 12 percent.
There is fierce rivalry between the trio and smaller providers. Last month, Microsoft accused Google of running “shadow campaigns” seeking to undermine its position with regulators by secretly bankrolling hostile lobbying groups.
Microsoft also alleged that Google tried to derail its settlement with EU cloud providers by offering them $500 million in cash and credit to reject its deal and continue pursuing litigation.
The European Commission (EC) has opened an antitrust investigation into US-based glass-maker Corning, claiming that its Gorilla Glass has dominated the mobile phone screen market due to restrictive deals and licensing.
Corning’s shatter-resistant alkali-aluminosilicate glass keeps its place atop the market, according to the EC’s announcement, because it both demands, and rewards with rebates, device makers that agree to “source all or nearly all of their (Gorilla Glass) demand from Corning.” Corning also allegedly required device makers to report competitive offers to the glass maker. The company is accused of exerting a similar pressure on “finishers,” or those firms that turn raw glass into finished phone screen protectors, as well as demanding finishers not pursue patent challenges against Corning.
“[T]he agreements that Corning put in place with OEMs and finishers may have excluded rival glass producers from large segments of the market, thereby reducing customer choice, increasing prices, and stifling innovation to the detriment of consumers worldwide,” the Commission wrote.
Ars has reached out to Corning for comment and will update this post with response.
Gorilla Glass does approach Xerox or Kleenex levels of brand name association with its function. New iterations of its thin, durable glass reach a bit further than the last and routinely pick up press coverage. Gorilla Glass 4 was pitched as being “up to two times stronger” than any “competitive” alternative. Gorilla Glass 5 could survive a 1.6-meter drop 80 percent of the time, and 6 built in more repetitive damage resistance.
The Department of Justice is reportedly deepening its probe into Nvidia. Officials have moved on from merely questioning competitors to subpoenaing Nvidia and other tech companies for evidence that could substantiate allegations that Nvidia is abusing its “dominant position in AI computing,” Bloomberg reported.
When news of the DOJ’s probe into the trillion-dollar company was first reported in June, Fast Company reported that scrutiny was intensifying merely because Nvidia was estimated to control “as much as 90 percent of the market for chips” capable of powering AI models. Experts told Fast Company that the DOJ probe might even be good for Nvidia’s business, noting that the market barely moved when the probe was first announced.
But the market’s confidence seemed to be shaken a little more on Tuesday, when Nvidia lost a “record-setting $279 billion” in market value following Bloomberg’s report. Nvidia’s losses became “the biggest single-day market-cap decline on record,” TheStreet reported.
People close to the DOJ’s investigation told Bloomberg that the DOJ’s “legally binding requests” require competitors “to provide information” on Nvidia’s suspected anticompetitive behaviors as a “dominant provider of AI processors.”
One concern is that Nvidia may be giving “preferential supply and pricing to customers who use its technology exclusively or buy its complete systems,” sources told Bloomberg. The DOJ is also reportedly probing Nvidia’s acquisition of RunAI—suspecting the deal may lock RunAI customers into using Nvidia chips.
Bloomberg’s report builds on a report last month from The Information that said that Advanced Micro Devices Inc. (AMD) and other Nvidia rivals were questioned by the DOJ—as well as third parties who could shed light on whether Nvidia potentially abused its market dominance in AI chips to pressure customers into buying more products.
According to Bloomberg’s sources, the DOJ is worried that “Nvidia is making it harder to switch to other suppliers and penalizes buyers that don’t exclusively use its artificial intelligence chips.”
In a statement to Bloomberg, Nvidia insisted that “Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them.” Additionally, Bloomberg noted that following a chip shortage in 2022, Nvidia CEO Jensen Huang has said that his company strives to prevent stockpiling of Nvidia’s coveted AI chips by prioritizing customers “who can make use of his products in ready-to-go data centers.”
Potential threats to Nvidia’s dominance
Despite the slump in shares, Nvidia’s market dominance seems unlikely to wane any time soon after its stock more than doubled this year. In an SEC filing this year, Nvidia bragged that its “accelerated computing ecosystem is bringing AI to every enterprise” with an “ecosystem” spanning “nearly 5 million developers and 40,000 companies.” Nvidia specifically highlighted that “more than 1,600 generative AI companies are building on Nvidia,” and according to Bloomberg, Nvidia will close out 2024 with more profits than the total sales of its closest competitor, AMD.
According to Kanter, the DOJ is scrutinizing all aspects of the AI industry—”everything from computing power and the data used to train large language models, to cloud service providers, engineering talent and access to essential hardware such as graphics processing unit chips.” But in particular, the DOJ appears concerned that GPUs like Nvidia’s advanced AI chips remain a “scarce resource.” Kanter told the Financial Times that an “intervention” in “real time” to block a potential monopoly could be “the most meaningful intervention” and the least “invasive” as the AI industry grows.
A US judge has temporarily blocked the launch of a sports streaming service formed by Disney’s ESPN, Warner Bros and Fox, finding that it was likely to “substantially lessen competition” in the market.
The service, dubbed Venu, was expected to launch later this year. But FuboTV, a sports-focused streaming platform, filed an antitrust suit in February to block it, arguing its business would “suffer irreparable harm” as a result.
On Friday, US District Judge Margaret Garnett in New York granted an injunction to halt the launch of the service while Fubo’s lawsuit against the entertainment giants works its way through the court.
The opinion was sealed but the judge noted in an entry on the court docket that Fubo was “likely to succeed on its claims” that by entering the agreement, the companies “will substantially lessen competition and restrain trade in the relevant market” in violation of antitrust law.
In a statement, ESPN, Fox and Warner Bros Discovery said they planned to appeal against the decision.
Venu was aimed at US consumers who had either ditched their traditional pay TV packages for streaming or never signed up for a cable subscription. “Cord cutting” has been eroding the traditional TV business for years, but live sports has remained a primary draw for customers who have held on to their cable subscriptions.
Fubo TV was launched in 2015 as a sports-focused streamer. It offers more than 350 channels—including those carrying major sporting events such as Premier League football matches, baseball, the National Football League and the US National Basketball Association—for monthly subscription prices starting at $79.99. Its offerings included networks owned by Disney and Fox.
ESPN, Fox and Warner Bros said Venu was “pro-competitive,” aimed at reaching “viewers who currently are not served by existing subscription options.”
Venu was expected to charge $42.99 a month when it launched later this month. It “will feature just 15 channels, all featuring popular live sports—the kind of skinny sports bundle that Fubo has tried to offer for nearly a decade, only to encounter tooth-and-nail resistance,” Fubo said in a court filing seeking the injunction.
Venu was expected to aggregate about $16 billion worth of sports rights, analysts have estimated. It was not expected to have an impact on the individual companies’ ability to strike new rights deals.
Analysts had questioned its position in the marketplace. Disney plans to roll out ESPN as a “flagship” streaming service in August 2025 that will carry programming that appears on the TV network as well as gaming, shopping and other interactive content. Disney chief executive Bob Iger said he wants the service to become the “pre-eminent digital sports platform.”
Fubo shares rose 16.8 percent after the ruling, but the stock is down 51 percent this year.
After US District Judge Amit Mehta ruled that Google has a monopoly in two markets—general search services and general text advertising—everybody is wondering how Google might be forced to change its search business.
Specifically, the judge ruled that Google’s exclusive deals with browser and device developers secured Google’s monopoly. These so-called default agreements funneled the majority of online searches to Google search engine result pages (SERPs), where results could be found among text ads that have long generated the bulk of Google’s revenue.
At trial, Mehta’s ruling noted, it was estimated that if Google lost its most important default deal with Apple, Google “would lose around 65 percent of its revenue, even assuming that it could retain some users without the Safari default.”
Experts told Ars that disrupting these default deals is the most obvious remedy that the US Department of Justice will seek to restore competition in online search. Other remedies that may be sought range from least painful for Google (mandating choice screens in browsers and devices) to most painful (requiring Google to divest from either Chrome or Android, where it was found to be self-preferencing).
But the remedies phase of litigation may have to wait until after Google’s appeal, which experts said could take years to litigate before any remedies are ever proposed in court. Whether Google could be successful in appealing the ruling is currently being debated, with anti-monopoly advocates backing Mehta’s ruling as “rock solid” and critics suggesting that the ruling’s fresh takes on antitrust law are open to attack.
Google declined Ars’ request to comment on appropriate remedies or its plan to appeal.
Previously, Google’s president of global affairs, Kent Walker, confirmed in a statement that the tech giant would be appealing the ruling because the court found that “Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile devices,’ ‘has continued to innovate in search,’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior.'”
“Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal,” Walker said. “As this process continues, we will remain focused on making products that people find helpful and easy to use.”
But Mehta found that Google was wielding its outsize influence in the search industry to block rivals from competing by locking browsers and devices into agreements ensuring that all searches went to Google SERPs. None of the pro-competitive benefits that Google claimed justified the exclusive deals persuaded Mehta, who ruled that “importantly,” Google “exercised its monopoly power by charging supra-competitive prices for general search text ads”—and thus earned “monopoly profits.”
While experts think the appeal process will delay litigation on remedies, Google seems to think that Mehta may rule on potential remedies before Google can proceed with its appeal. Walker told Google employees that a ruling on remedies may arrive in the next few months, The Wall Street Journal reported. Ars will continue monitoring for updates on this timeline.
As the DOJ’s case against Google’s search business has dragged on, reports have long suggested that a loss for Google could change the way that nearly the entire world searches the Internet.
Adam Epstein—the president and co-CEO of adMarketplace, which bills itself as “the largest consumer search technology company outside of Google and Bing”—told Ars that innovations in search could result in a broader landscape of more dynamic search experiences that draw from sources beyond Google and allow searchers to skip Google’s SERPs entirely. If that happens, the coming years could make Google’s ubiquitous search experience today a distant memory.
“By the end of this decade, going to a search engine results page will seem quaint,” Epstein predicted. “The court’s decision sets the stage for a remedy that will dramatically improve the search experience for everyone connected to the web. The era of innovation in search is just around the corner.”
The DOJ has not meaningfully discussed potential remedies it will seek, but Jonathan Kanter, assistant attorney general of the Justice Department’s antitrust division, celebrated the ruling.
“This landmark decision holds Google accountable,” Kanter said. “It paves the path for innovation for generations to come and protects access to information for all Americans.”
The landmark antitrust ruling against Google on Monday is shaking up one of the longest-standing partnerships in tech.
At the heart of the case are billions of dollars’ worth of exclusive agreements Google has inked over the years to become the default search engine on browsers and devices across the world. No company benefited more than fellow Big Tech giant Apple—which US District Judge Amit Mehta called a “crucial partner” to Google.
During a weekslong trial, Apple executives showed up to explain and defend the partnership. Under a deal that first took shape in 2002, Google paid a cut of search advertising revenue to Apple to direct its users to Google Search as default, with payments reaching $20 billion for 2022, according to the court’s findings. In exchange, Google got access to Apple’s valuable user base—more than half of all search queries in the US currently flow through Apple devices.
Since Monday’s ruling, Apple has been quiet. But it is likely to be deeply involved in the next phase of the case, which will address the proposed fix to Google’s legal breaches. Remedies in the case could be targeted or wide-ranging. The Department of Justice, which brought the case, has not said what it will seek.
“The most profound impact of the judgment is liable to be felt by Apple,” said Eric Seufert, an independent analyst.
JPMorgan analysts wrote that the ruling left Apple with a range of “inconvenient alternatives,” including the possibility of a new revenue-sharing agreement with Google that does not grant it exclusive rights as the default search engine, thereby reducing its value.
Reaching revenue-sharing deals with alternative search engines like Microsoft’s Bing, they wrote, would “offer lower economic benefits for Apple, given Google’s superior advertising monetisation.”
Mehta noted in his ruling that the idea of replacing the Google agreement with one involving Microsoft and Bing had come up previously. Eddy Cue, Apple’s senior vice-president of services, “concluded that a Microsoft-Apple deal would only make sense if Apple ‘view[ed] Google as somebody [they] don’t want to be in business with and therefore are willing to jeopardize revenue to get out. Otherwise it [was a] no brainer to stay with Google as it is as close to a sure thing as can be,’” Mehta wrote.
Apple could build its own search engine. It has not yet done so, and the judge in the case stopped short of agreeing with the DoJ that the Google deal amounted to a “pay-off” to Apple to keep it out of the search engine market. An internal Apple study in 2018, cited in the judge’s opinion, found that even if it did so and maintained 80 percent of queries, it would still lose $12 billion in revenue in the first five years after separating from Google.
Mehta cited an email from John Giannandrea, a former Google executive who now works for Apple, saying, “There is considerable risk that [Apple] could end up with an unprofitable search engine that [is] also not better for users.”
Google has vowed to appeal against the ruling. Nicholas Rodelli, an analyst at CRFA Research, said it was a “long shot,” given the “meticulous” ruling.
Rodelli said he believed the judge “isn’t likely to issue a game-changing injunction,” such as a full ban on revenue-sharing with Apple. Depending on the remedy the judge decides for Google’s antitrust violations, Seufert said Apple could “either be forced to accept a much less lucrative arrangement with Microsoft [over Bing] or may be prevented from selling search defaults at all.”
“It’s certainly going to adjust the relationship between Google and Apple,” said Bill Kovacic, a former Federal Trade Commission chair and professor of competition law and policy at George Washington University Law School.
Mozilla’s funding may be at risk
Apple is not the only company potentially affected by Monday’s ruling. According to the court, Google’s 2021 payment to Mozilla for the default position on its browser was more than $400 million, about 80 percent of Mozilla’s operating budget. A spokesperson for Mozilla said it was “closely reviewing” the decision and “how we can positively influence the next steps.”
Meanwhile, the search market is undergoing a transformation, as companies such as Google and Microsoft explore how generative AI chatbots can transform traditional search features.
Apple’s partnership with OpenAI, announced in June, will allow users to direct their queries to its chatbot ChatGPT. A smarter Siri voice assistant powered by Apple’s own proprietary AI models will also create a new outlet for user queries that might otherwise go to Google. Apple’s models are trained using Applebot, a web crawler that, much like the technology behind a search engine, compiles public information from across the Internet.
Traditional search is showing no signs of slowing. Research from Emarketer finds that, in the US alone, spend on search advertising will grow at an average of about 10 percent each year, hitting $184 billion in 2028. Google, the dominant player by a long shot, captures about half of that spend. Apple’s current deal with Google would have allowed it to unilaterally extend the partnership into 2028.
The Cupertino, California-based iPhone maker has its own antitrust battle to wage. The DoJ’s antitrust division, led by Jonathan Kanter, filed a sweeping lawsuit against Apple in March, making it the latest Big Tech giant to be targeted by the Biden administration’s enforcers.
The legal troubles reflect an ongoing decline in Apple’s relationship with policymakers in Washington, despite an effort by chief executive Tim Cook to step up the company’s lobbying of the Biden White House, according to research by the Tech Transparency Project. TTP found that Apple spent $9.9 million on lobbying the federal government in 2023—its highest in 25 years, though still much lower than the likes of Google, Amazon, and Meta.
Google’s parent company, Alphabet, is in talks to buy cybersecurity start-up Wiz for about $23 billion, in what would be the largest acquisition in the tech group’s history, according to people familiar with the matter.
Alphabet’s discussions to acquire Wiz are still weeks away from completion, said one person with direct knowledge of the matter, while people briefed about the transaction said there was still a chance the deal would fall apart, with a number of details still needing to be addressed in talks.
If a deal were to be reached it would be a test case for antitrust regulators, which in recent years have been cracking down on tech groups buying out emerging companies in the sector. Alphabet’s last big deal came more than a decade ago with the $12.5 billion acquisition of Motorola Mobility.
The acquisition of Wiz would mark a further big push into cyber security for Alphabet, two years after it acquired Mandiant for $5.4 billion.
New York-headquartered Wiz has raised about $2 billion from investors since its founding four years ago, according to data provider PitchBook. The start-up, led by Israeli founder and former Microsoft executive Assaf Rappaport, was most recently valued at $12 billion. Its backers include venture capital firms Sequoia and Thrive.
Wiz, which counts multinational groups including Salesforce, Mars, and BMW as customers, helps companies secure programs in the cloud. That has led to a surge in revenue as corporations increasingly operate their software and store data online—Wiz has said it has hit about $350 million in annual recurring revenue, a metric often used by software start-ups.
A deal would be among the largest acquisitions of a company backed by venture capital.
Wiz declined to comment on the talks, which were first reported by The Wall Street Journal. Google did not immediately respond to a request for comment.
Enlarge/ EU competition chief Margrethe Vestager said the bloc was looking into practices that could in effect lead to a company controlling a greater share of the AI market.
Brussels is preparing for an antitrust investigation into Microsoft’s $13 billion investment into OpenAI, after the European Union decided not to proceed with a merger review into the most powerful alliance in the artificial intelligence industry.
The European Commission, the EU’s executive arm, began to explore a review under merger control rules in January, but on Friday announced that it would not proceed due to a lack of evidence that Microsoft controls OpenAI.
However, the commission said it was now exploring the possibility of a traditional antitrust investigation into whether the tie-up between the world’s most valuable listed company and the best-funded AI start-up was harming competition in the fast-growing market.
The commission has also made inquiries about Google’s deal with Samsung to install a modified version of its Gemini AI system in the South Korean manufacturer’s smartphones, it revealed on Friday.
Margrethe Vestager, the bloc’s competition chief, said in a speech on Friday: “The key question was whether Microsoft had acquired control on a lasting basis over OpenAI. After a thorough review we concluded that such was not the case. So we are closing this chapter, but the story is not over.”
She said the EU had sent a new set of questions to understand whether “certain exclusivity clauses” in the agreement between Microsoft and OpenAI “could have a negative effect on competitors.” The move is seen as a key step toward a formal antitrust probe.
The bloc had already sent questions to Microsoft and other tech companies in March to determine whether market concentration in AI could potentially block new companies from entering the market, Vestager said.
Microsoft said: “We appreciate the European Commission’s thorough review and its conclusion that Microsoft’s investment and partnership with OpenAI does not give Microsoft control over the company.”
Brussels began examining Microsoft’s relationship with the ChatGPT maker after OpenAI’s board abruptly dismissed its chief executive Sam Altman in November 2023, only to be rehired a few days later. He briefly joined Microsoft as the head of a new AI research unit, highlighting the close relationship between the two companies.
Regulators in the US and UK are also scrutinizing the alliance. Microsoft is the biggest backer of OpenAI, although its investment of up to $13 billion, which was expanded in January 2023, does not involve acquiring conventional equity due to the startup’s unusual corporate structure. Microsoft has a minority interest in OpenAI’s commercial subsidiary, which is owned by a not-for-profit organization.
Antitrust investigations tend to last years, compared with a much shorter period for merger reviews, and they focus on conduct that could be undermining rivals. Companies that are eventually found to be breaking the law, for example by bundling products or blocking competitors from access to key technology, risk hefty fines and legal obligations to change their behavior.
Vestager said the EU was looking into practices that could in effect lead to a company controlling a greater share of the AI market. She pointed to a practice called “acqui-hires,” where a company buys another one mainly to get its talent. For example, Microsoft recently struck a deal to hire most of the top team from AI start-up Inflection, in which it had previously invested. Inflection remains an independent company, however, complicating any traditional merger investigation.
The EU’s competition chief said regulators were also looking into the way big tech companies may be preventing smaller AI models from reaching users.
“This is why we are also sending requests for information to better understand the effects of Google’s arrangement with Samsung to pre-install its small model ‘Gemini nano’ on certain Samsung devices,” said Vestager.
Jonathan Kanter, the top US antitrust enforcer, told the Financial Times earlier this month that he was also examining “monopoly choke points and the competitive landscape” in AI. The UK’s Competition and Markets Authority said in December that it had “decided to investigate” the Microsoft-OpenAI deal when it invited comments from customers and rivals.
Brussels is set to issue new antitrust charges against Microsoft over concerns that the software giant is undermining rivals to its videoconferencing app Teams.
According to three people with knowledge of the move, the European Commission is pressing ahead with a formal charge sheet against the world’s most valuable listed tech company over concerns it is restricting competition in the sector.
Microsoft last month offered concessions as it sought to avoid regulatory action, including extending a plan to unbundle Teams from other software such as Office, not just in Europe but across the world.
However, people familiar with their thinking said EU officials were still concerned that the company did not go far enough to facilitate fairness in the market.
Rivals are concerned that Microsoft will make Teams run more compatibly than rival apps with its own software. Another concern is the lack of data portability, which makes it difficult for existing Teams users to switch to alternatives.
The commission’s move would represent an escalation of a case that dates back to 2020 after Slack, now owned by Salesforce, submitted a formal complaint over Microsoft’s Teams.
It also would end a decade-long truce between EU regulators and the US tech company, after a series of competition probes that ended in 2013. The EU then issued a 561 million euro fine against Microsoft for failure to comply with a decision over the bundling of the Internet Explorer browser with its Windows operating system.
Charges could come in the next few weeks, said the people familiar with the commission’s thinking. Rivals of Microsoft and the commission are meeting this week to discuss the case, in an indication that the charges are being prepared, the people said.
However, they warned that Microsoft could still offer last-minute concessions that would derail the EU’s case, or the commission might decide to delay or scrap the charges against the company.
Microsoft risks fines of up to 10 percent of its global annual turnover if found to have breached the EU competition law.
The company declined to comment but referred to an earlier statement that said it would “continue to engage with the commission, listen to concerns in the marketplace, and remain open to exploring pragmatic solutions that benefit both customers and developers in Europe.”
The commission declined to comment.
The move against Microsoft comes at a time of heightened scrutiny of its activities. The EU is also investigating whether the tech group’s $13 billion alliance with ChatGPT maker OpenAI breaks competition law.
Microsoft is also part of a handful of tech companies, including Google and Meta, caught as “gatekeepers” under the new Digital Markets Act, meaning it has special responsibilities when trading in Europe.
The tech company has also faced complaints from European cloud computing providers that are concerned that Microsoft is abusing its dominant position in the sector to force users to buy its products and squashing competition from smaller start-ups in Europe.
In mid-June 2019, Microsoft co-founder Bill Gates and CEO Satya Nadella received a rude awakening in an email warning that Google had officially gotten too far ahead on AI and that Microsoft may never catch up without investing in OpenAI.
With the subject line “Thoughts on OpenAI,” the email came from Microsoft’s chief technology officer, Kevin Scott, who is also the company’s executive vice president of AI. In it, Scott said that he was “very, very worried” that he had made “a mistake” by dismissing Google’s initial AI efforts as a “game-playing stunt.”
It turned out, Scott suggested, that instead of goofing around, Google had been building critical AI infrastructure that was already paying off, according to a competitive analysis of Google’s products that Scott said showed that Google was competing even more effectively in search. Scott realized that while Google was already moving on to production for “larger scale, more interesting” AI models, it might take Microsoft “multiple years” before it could even attempt to compete with Google.
As just one example, Scott warned, “their auto-complete in Gmail, which is especially useful in the mobile app, is getting scarily good.”
Microsoft had tried to keep this internal email hidden, but late Tuesday it was made public as part of the US Justice Department’s antitrust trial over Google’s alleged search monopoly. The email was initially sealed because Microsoft argued that it contained confidential business information, but The New York Times intervened to get it unsealed, arguing that Microsoft’s privacy interests did not outweigh the need for public disclosure.
In an order unsealing the email among other documents requested by The Times, US District Judge Amit Mehta allowed to be redacted some of the “sensitive statements in the email concerning Microsoft’s business strategies that weigh against disclosure”—which included basically all of Scott’s “thoughts on OpenAI.” But other statements “should be disclosed because they shed light on Google’s defense concerning relative investments by Google and Microsoft in search,” Mehta wrote.
At the trial, Google sought to convince Mehta that Microsoft, for example, had failed to significantly invest in mobile early on, giving Google a competitive advantage in mobile search that it still enjoys today. Scott’s email seems to suggest that Microsoft was similarly dragging its feet on investing in AI until Scott’s wakeup call.
Nadella’s response to the email was immediate. He promptly forwarded the email to Microsoft’s chief financial officer, Amy Hood, on the same day that he received it. Scott’s “very good email,” Nadella told Hood, explained “why I want us to do this.” By “this,” Nadella presumably meant exploring investment opportunities in OpenAI.
Officially, Microsoft has said that its OpenAI partnership was formed “to accelerate AI breakthroughs to ensure these benefits are broadly shared with the world”—not to keep up with Google.
But at the Google trial, Nadella testified about the email, saying that partnering with companies like OpenAI ensured that Microsoft could continue innovating in search, as well as in other Microsoft services.
On the stand, Nadella also admitted that he had overhyped AI-powered Bing as potentially shaking up the search market, backing up the DOJ by testifying that in Silicon Valley, Internet search is “the biggest no-fly zone.” Even after partnering with OpenAI, Nadella said that for Microsoft to compete with Google in search, there are “limits to how much artificial intelligence can reshape the market as it exists today.”
During the Google trial, the DOJ argued that Google’s alleged search market dominance had hindered OpenAI’s efforts to innovate, too. “OpenAI’s ChatGPT and other innovations may have been released years ago if Google hadn’t monopolized the search market,” the DOJ argued, according to a Bloomberg report.
Closing arguments in the Google trial start tomorrow, with two days of final remarks scheduled, during which Mehta will have ample opportunity to ask lawyers on both sides the rest of his biggest remaining questions.
It’s somewhat obvious what Google will argue. Google has spent years defending its search business as competing on the merits—essentially arguing that Google dominates search simply because it’s the best search engine.
Yesterday, the US district court also unsealed Google’s proposed legal conclusions, which suggest that Mehta should reject all of the DOJ’s monopoly claims, partly due to the government’s allegedly “fatally flawed” market definitions. Throughout the trial, Google has maintained that the US government has failed to show that Google has a monopoly in any market.
According to Google, even its allegedly anticompetitive default browser agreement with Apple—which Mehta deemed the “heart” of the DOJ’s monopoly case—is not proof of monopoly powers. Rather, Google insisted, default browser agreements benefit competition by providing another avenue through which its rivals can compete.
Mehta has not yet disclosed when to expect his ruling, but it could come late this summer or early fall, AP News reported.
If Google loses, the search giant may be forced to change its business practices or potentially even break up its business. Nobody knows what that would entail, but when the trial started, a coalition of 20 civil society and advocacy groups recommended some potentially drastic remedies, including the “separation of various Google products from parent company Alphabet, including breakouts of Google Chrome, Android, Waze, or Google’s artificial intelligence lab Deepmind.”
