German Federal Cartel Office: Microsoft becomes a test case

Once again, a U.S. tech company has been targeted by German antitrust authorities. As the German Federal Cartel Office has now announced, it wants to investigate Microsoft. The suspicion is that the Windows inventor may have an “outstanding cross-market significance for competition”.

With Microsoft, another tech company as a test case

The proceedings should not be new for the Federal Cartel Office. After all, not only many other conventional companies have been on the agenda so far. With Microsoft, another tech giant from the United States of America has joined the ranks of the Bonn-based authority’s inspection files. Thus, the competition protectors not only took up proceedings against Google parent Alphabet in the summer of 2022. On top of that, Amazon and Meta were already under scrutiny. Now another U.S. company from the tech industry is facing accusations of not complying with German competition law. On Wednesday, March 28, 2023, the German Federal Cartel Office officially announced that it had now initiated an investigation into the software giant. The aim is to clarify whether this has an “overriding, cross-market significance”.

Microsoft operates broadly

Microsoft has long been known for more than just developing Windows, probably the world’s most important software solution. On top of that, the corporation is also active in many other areas of the technology world. This also seems to be the main reason for the test procedure, if one takes a closer look at the justification published by Andreas Mundt, President of the German Federal Cartel Office. This is because the latter not only says that Microsoft “with Windows and the Office products traditionally holds a very strong position in operating systems and office software.” On top of that, the product range has expanded significantly in recent years. He cites not only the Azure and OneDrive cloud services, which are closely linked to other Microsoft applications.

Teams, a software for video telephony that has celebrated resounding success thanks primarily to Corona and Homeoffice, has also become a promising player for the tech company. Microsoft is also one of the big players in consumer electronics. This is not least due to the successful Xbox division. Here, the company regularly makes headlines with major purchases from developer studios. In January 2022, for example, Bethesda was purchased for a proud sum of 70 billion US dollars. Most recently, it became known that Microsoft was toying with the purchase of Activision Blizzard. Furthermore, the company is active as a search engine provider with Bing and operates a social network with LinkedIn.

Most recently, Microsoft caused a stir when it put the proud sum of $10 billion into the further development of ChatGPT. This could well have been the wake-up call for the German Federal Cartel Office. Should the competition protectors succeed in backing up the accusations against Microsoft with watertight evidence, the corporation will face annoying consequences. The categorization as a company with outstanding cross-market significance would mean that future decisions would be strictly scrutinized by the Federal Cartel Office. The latter would then not simply wave the action through idly, but could summarily prohibit it without strict legal hurdles.

Federal Cartel Office is “spoilsport” for tech corporations

With its inspection powers, the Federal Cartel Office aims to ensure fair competition in the local market. But the federal agency’s catalog of measures has not always been so broad. In fact, it is barely two years since Section 19a of the ARC was brought into being. This provides for an expansion of the authority’s powers in the area of abuse control over large digital groups. Now there is a two-stage procedure that allows the authority to summarily prohibit corporate actions. The prerequisite for this is a massive threat to competition.

Within the framework of these powers, the Federal Cartel Office has now called stage one. The aim is to establish whether the Group has a dominant market position at all. In view of the diverse range of services that Microsoft has been offering for some time, the outcome should probably not come as a surprise. Otherwise, the other U.S. tech companies might not only feel that they have been put on the spot, but that they have simply been treated unfairly. After all, Meta, Alphabet and Amazon have already been regarded as companies with outstanding cross-market significance for competition since 2022.