Microsoft and Google have ended an almost six-year truce to prevent open warfare between the rival Big Tech companies, clearing the way for direct conflict as regulators take aim at barriers to competition among the leading US technology groups.
The software and internet search giants reached an unusual pact in 2015 to end a running battle that had been fought out in courtrooms and in front of regulators around the world. It was forged soon after Sundar Pichai became chief executive of Google and Satya Nadella took the reins at Microsoft.
But the pact expired in the middle of April when the two sides decided not to renew it, according to people familiar with the situation. The decision to let it lapse came as regulators around the world seek to challenge practices that may have entrenched the leading tech companies and prevented more open competition.
Under the agreement, the companies had settled outstanding lawsuits and agreed not to litigate or complain about each other to regulators without first trying to resolve disagreements at the highest level internally, according to two people familiar with the terms.
The pact also sought to bring closer co-operation in areas of mutual business interest – though people close to both companies have maintained that it did nothing to soften direct competition in markets including cloud computing and online productivity applications.
The deal to give up some of the weapons the tech groups had used against each other prompted questions in some quarters about the impact on competition.
"It's always a little puzzling when you see direct competitors working on private agreements," Eric Goldman, a law professor at Santa Clara University, said of the 2015 pact. However, he said that ending the "dirty tricks" employed by both sides appeared to be a way to end the destructive rivalry without necessarily weakening competition.
“The tricks Microsoft was playing on Google were hurting the entire industry - including Microsoft,” Goldman added.
In one of its most notorious charges, the software company ran a series of attack ads called “Scroogled” that accused Google of employing techniques to boost its profits by “screwing” its users.
There had already been renewed signs of the rivalry spilling back into public feuding. Brad Smith, Microsoft's president, came out stridently against Google over its threat to withdraw its search service in Australia rather than bow to a law forcing it to pay news publishers for content, including in testimony before Congress in March.
In a recent interview with Bloomberg TV, Smith also complained that Google had “turned a deaf ear” to Microsoft’s pleas that it make its dominant digital advertising services interoperable with other companies, something that would make the industry more competitive.
The advertising issue featured in a lawsuit that Colorado and several other US states brought against Google in December. Microsoft would not comment on whether it had lobbied regulators on the matter.
Some people inside Microsoft believed that the pact had been more beneficial for Google than for the software company, according to a person familiar with the company’s thinking.
Microsoft's willingness to turn its fire away from Google also came at a moment when the search company's business practices were drawing more regulatory scrutiny around the world. Microsoft, by contrast, has not featured in the antitrust investigations into Big Tech groups, despite last week becoming only the second tech company, after Apple, to be valued at more than $2 trillion (€1.69 trillion).
Yet attempts at closer business co-operation between the companies have not yielded some of the benefits Microsoft had sought. These included finding ways to run mobile apps built for Google’s Android operating system on Windows personal computers – something that would help to make up for some of Microsoft’s weakness in the smartphone sector and provide a bulwark against Apple. – Copyright The Financial Times Limited 2021