Microsoft courts fresh regulatory scrutiny over security software practices as EU lawmakers consider probe

Microsoft could face an EU probe into whether its security software practices are prohibiting customers from accessing rival products, marking the tech giant's latest run-in with regulators. 

The Entra ID management software, which lets companies control who can log into cloud-based platforms, will be the focus of a number of questions from EU regulators, who seek to understand whether Microsoft customers are able to use rival software.

"The Commission has received several complaints regarding Microsoft, including in relation to its product Azure, which we are assessing based on our standard procedures," an EU spokesperson told Reuters last week.

The launch of the probe comes amid a period of intense regulatory scrutiny for Microsoft, with several other ongoing probes and investigations placing it in a precarious position.

As is the case with this latest probe, though, most of the current regulatory inquisitions are only in their nascent stages and not at the point where Microsoft might incur a fine or penalty.

Alex Haffner, partner at UK-based law firm, Fladgate, told ITPro that while the probe is still in its infancy, regulators could decide on a deeper exploration of the firm’s practices.

“In this case no formal investigation has yet been opened by the EU Commission,” he said. “It is reportedly at the stage of assessing whether complaints about practices relating to security software have any base merit before deciding what, if any, steps to take."

The situation nonetheless marks another case of looming regulatory scrutiny for Microsoft. Its AI investments, for example, have been a key talking point for EU lawmakers in recent months.

Having invested around $13 billion into OpenAI so far, Microsoft made itself the focus of EU suspicions as the Commission began looking into whether its relationship with the firm “might be reviewable under EU merger regulation”.

In this instance, preliminary probes have also been launched by regulators in the UK and US. 

Regulatory concerns over its recent investment in French generative AI startup, Mistral AI have also emerged. Lawmakers in the union confirmed plans for a preliminary investigation into the deal, amid concerns this could also could infringe merger legislation.

Microsoft noted that its investment in the Paris-based firm will convert into equity in an upcoming funding round.

Haffner suggested that the current Entra interest may prompt similar action by counterparts elsewhere in Europe and across the Atlantic.

“It is also likely that it will not be just the EU authorities who may wish to delve into the matter further, with their UK and US counterparts in particular likely to be taking a close interest, if not considering opening their own investigations,” Haffner said.

Microsoft in the crosshairs

In addition to AI-related scrutiny, Microsoft has faced repeated criticism for its practices in the cloud computing space. 

A European cloud infrastructure group, CISPE, filed a competition complaint against the firm in November 2022. A period of investigation from the Directorate General for Competition followed, though, surprisingly, the most recent development came from Microsoft itself.

The firm is attempting to remedy the situation by entering into talks with the trade group, marking a proactive move to mitigate against the bad press.

Prior to this, Microsoft announced it would be unbundling Teams from its Microsoft 365 and Office 365 productivity software suites in a similar attempt to ward off increasing EU scrutiny.

Tensions remain high, though, with Google Cloud VP Amit Zavery recently making public criticisms of Microsoft’s bullish cloud tactics and attempts to create a “walled garden” out of its cloud services. 

Groundhog Day for Microsoft

Microsoft is no stranger to regulatory scrutiny, according to Haffner, and has frequently clashed with lawmakers over the last 25 years over its business practices. 

The firm came under a comparable level of fire towards the end of the 1990s and the beginning of the 2000s as a result of Windows.

“In many ways, it may be experiencing something of a groundhog day feeling,” Haffner said.

“The current situation mirrors closely the position Microsoft found itself in the 1990s/early 2000s when it faced numerous investigations and legal battles with competition regulators around the stranglehold the company had over customers through its ubiquitous Windows operating system,” he added.