May 28, 2022

Vision Cim

Thank Business Its Friday

Microsoft is bigger than Google, Amazon and Facebook. But lawmakers treat it like an ally in antitrust battles

When Google announced in 2019 that it would acquire Fitbit for $2 billion, lawmakers didn’t hide their frustration.

“By attempting this deal at this moment, Google is signaling that it will continue to flex and expand its power despite this immense scrutiny,” Rep. David Cicilline, D-R.I., chairman of the House Judiciary antitrust subcommittee, said in a statement the same day the deal was announced.

But more than 24 hours after Microsoft announced its plans to purchase Activision for nearly $70 billion, aggressive trustbusters in Congress were uncharacteristically quiet. Core sponsors of antitrust legislation targeting the tech industry, including Cicilline, Sen. Amy Klobuchar, D-Minn., and Sen. Tom Cotton, R-Ark., did not immediately comment to The Washington Post on the deal.

The silence underscores how Microsoft has carved out a distinct reputation among policymakers, distancing itself from the political scrutiny embroiling its top competitors in Washington, D.C. As Apple, Facebook, Amazon and Google were marshaling their Washington resources to beat back competition legislation up for debate on Capitol Hill this week, Microsoft smoothly announced one of the largest acquisitions in the history of the tech industry.

The company had apparently deputized its reputation with lawmakers to assure them about the deal. Rep. Ken Buck of Colorado, the top Republican on the House Judiciary antitrust subcommittee who has supported legislation aimed at major tech companies, told The Post that he received “encouraging” assurances about how the company would ensure competition in gaming.

“If the company keeps its word, I believe that the increase in competition in the gaming marketplace would be in keeping with the aims of my legislation,” Buck said.

Two decades after fighting its own antitrust battles in Washington, Microsoft has emerged as a sophisticated and experienced Washington operator, positioning itself as a willing participant in regulation and developing relationships that engender rare trust. The company has come a long way since the 1990s, when it was viewed as an arrogant competitor with little regard for politicking. Lawmakers in recent years have treated Redmond, where Microsoft is headquartered, like a trusted ally in their efforts to rein in other large tech companies.

As other tech giants have been embroiled in antitrust investigations, privacy scandals and scrutiny of their labor practices, Microsoft has quietly built its reach across the tech industry. The Activision deal is just the latest in the string of multibillion-dollar acquisitions that have allowed it to push into gaming, computer programming and the cloud. It is valued higher than Google parent Alphabet, Amazon and Facebook, lagging behind only Apple.

The company’s decision to push forward with the Activision deal, on the day federal antitrust enforcers announced a review of merger laws designed to address competition in tech, is both a statement of Microsoft’s security in D.C., and a test of that long-running political goodwill.

Sen. Elizabeth Warren, D-Mass., who has called for the breakup of large tech companies, said Wednesday that antitrust officials should scrutinize “any multibillion-dollar merger.”

“I have real concerns about how Microsoft’s proposed acquisition will affect workers given that concentrated corporate power can exacerbate unfair labor practices, including those reported against Activision,” she said in a statement. “A few giant corporations already dominate the gaming industry, and this deal raises questions about a level playing field for entrepreneurs and small publishers to compete.”

Microsoft, like other tech titans, is a major lobbying spender in Washington. But industry officials say the company has been more effective than its peers because of its long-running relationships and has a protracted legacy because of its early policy battles.

“Microsoft’s D.C. office is a generation older than most tech companies,” said Nu Wexler, who previously worked in policy communications for Twitter, Google and Facebook in Washington. “They’ve had time to build relationships on Capitol Hill while people were hiring and setting up PACs.”

At the center of those relationships is Microsoft President Brad Smith, the company’s most visible envoy to Washington. Smith, who joined the company in the 1990s and played a key role in its antitrust battles, has testified on Capitol Hill multiple times, including at least four times in 2021. Cicilline thanked him last year for “his assistance” during the course of lawmakers’ investigation into other large tech companies.

Smith has sought to position his testimony on regulation as bigger than just Microsoft or any single company, warning that policymakers risk moving “too slow” to address these problems.

“These issues are bigger than any single person, company, industry, or even technology itself,” Smith wrote in his 2019 book “Tools and Weapons: The Promise and the Peril of the Digital Age.” “They involve fundamental values of democratic freedoms and human rights.”

Before one of his recent Capitol Hill appearances, Rep. Pramila Jayapal, D-Wash., who sponsored legislation that could result in the breakup of some tech companies, lauded Smith as a prominent technology expert.

“I believe that’s given him a very unique and valuable perspective on the issues of tech and antitrust, and the responsibility of the tech industry to work with government on smart regulation that protects competition, innovation and democracy,” Jayapal said during a 2020 House hearing.

There are also fewer political rewards to gain from attacking Microsoft, because of its reputation as a staid enterprise tech business. The company does not necessarily generate the same headlines as businesses in social media, smartphones or e-commerce, according to Harry First, co-director of the Competition, Innovation and Information Law program at New York University.

“I think that Steve Jobs did such a great PR job making them so uncool that no one has bothered to worry about them,” said First, referencing a series of ads that Apple ran portraying the PC as a frumpy businessman in a suit and tie.

Microsoft is also less exposed to the content moderation controversies that have enveloped Facebook and Google’s YouTube, which have faced political blowback for their controversial handling of incendiary and harmful posts. As gatekeepers to digital marketplaces, Apple and Amazon have been pulled into political controversies — for instance, when they pulled support for the conservative social network Parler in the fallout of the Jan. 6 attacks. Microsoft’s key social service, LinkedIn, is focused on business networking, leaving it less vulnerable to political disputes.

Microsoft has seized on that distinction, at times advocating for regulation that could hurt the business interests of social media companies. Smith told The Post in 2019 that Section 230, a provision of law that protects companies from lawsuits over content created by their users, has outlived its utility.

“Section 230 had a place and time, but that time is now over,” he said in a 2019 interview.

And last year, Smith advocated for legislation targeting Facebook and Google. He called for the United States and other countries to adopt legislation similar to an Australian proposal that would force tech companies to pay publishers for news. In The Post, he accused social media companies of becoming “powerful engines of disinformation” and warned that without new guardrails, politicians would exploit social media. He also criticized strong-arm tactics that Facebook and Google used to battle the Australian proposal.

First credits Smith with changing the “outward-facing culture of the company.”

“I think he learned a long time ago that competition law can be a sword,” First said in an interview.

The Washington Post’s Cristiano Lima contributed to this report.

Microsoft Philanthropies underwrites some Seattle Times journalism projects.