The U.S. Federal Trade Commission is reportedly preparing to launch an investigation into claims that Microsoft Corp. uses anticompetitive practices in its cloud business.

The Financial Times, referencing unnamed “people with direct knowledge of the matter,” reported that the FTC is examining allegations that Microsoft is abusing its market power by imposing punitive licensing terms to prevent customers from moving their data from Azure to other platforms.

Among the allegations are that Microsoft substantially increases subscription fees for those who leave, imposes steep exit fees and allegedly makes Office 365 products incompatible with rival clouds. The net result of the alleged actions by Microsoft is to make it difficult and expensive for existing customers to leave its cloud ecosystem.

The FTC has yet to request any documents or other information formally from Microsoft as part of the preliminary inquiry, suggesting that a potential formal investigation is in its early days and there’s no guarantee that it will proceed.

A forthcoming change of administration in the U.S., following the election of Donald J Trump as the 47th President of the U.S., may also change whether an investigation will proceed, given that Republicans have also expressed concerns about big tech companies and their practices in the past. Conversely, the incoming administration may also go easier on big tech companies as part of a promise to decrease regulation and other hurdles that it says stifle innovation and growth.

The FTC’s probe of Microsoft’s practices with Azure comes after Google LLC wrote to the commission in June 2023 accusing Microsoft of anticompetitive practices.

In the letter, Google claimed that Microsoft employs software licensing restrictions that effectively force customers to use its Azure cloud computing services in order to save money. The accusations included that Microsoft takes advantage of the dominant position of Windows Server and Office to pressure customers to use Azure and uses a “complex web” of licensing restrictions that are designed to prevent businesses from diversifying their enterprise software vendors.

If this is starting to sound like what FTC is investigating, it may be, as Google referenced Microsoft’s policy of charging third-party cloud infrastructure providers, such as Google Cloud and Amazon Web Services Inc., a fee to run software like Windows Server and Office on their respective platforms. The costs are ultimately passed onto customers, but there is no additional fee to run Microsoft’s software on the Azure cloud.

Holger Mueller of Constellation Research Inc. noted last year that there’s a long history of software vendors attempting to keep out their competitors through licensing terms. “The basic ploy is that they either limit services by not allowing them to run on other clouds, or they charge more for allowing them to do so,” Mueller said.

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