Google and Microsoft agree to start suing each other again

Google and Microsoft agree to start suing each other again

The tech giants end five years of quietly settling their differences.

After years of relative calm, Google and Microsoft are tossing out their ceasefire, a move that—perhaps ironically—could bring each company additional antitrust scrutiny.

The non-aggression pact, signed five years ago, let the two companies set aside their numerous lawsuits. It also created a process by which they could resolve conflicts behind closed doors, requiring Microsoft and Google to follow that process before asking regulators to step in. During this time, the two companies have tussled over a number of issues, including whether search engines should pay news publishers. But Microsoft reached the end of its rope when it felt that Google wasn’t playing fair in ad tech.

Both companies attempted to solve the impasse through a series of escalating negotiations as laid out in the agreement. The matter ultimately reached the corner office, with CEOs Satya Nadella and Sundar Pichai holding a series of talks that didn’t reach a solution. That lack of a resolution is what apparently led to the agreement’s unraveling, according to a new Bloomberg report.

The ad tech problem surfaced just three years into the agreement, when Microsoft complained that Google was dragging its feet in supporting some of Bing’s new ad formats in one of its ad management tools, Search Ads 360. In addition, an antitrust lawsuit filed by state attorneys general claims that Google also favors its own platform by offering automated auctions to optimize bids; an equivalent tool isn’t available to advertisers seeking to book space on Bing. As a result of the moves (or lack thereof), advertisers using Google’s ad platform found it easier to buy ads on Google, not Bing. Other search engines that rely on Bing are also affected, including DuckDuckGo, Yahoo, and Ecosia.

“We raised the concerns with them, and they just turned a deaf ear,” Microsoft President Brad Smith said earlier this year. Google’s unwillingness to work with Bing, he said, was costing the company hundreds of millions of dollars per year in ad revenue.

Increasing scrutiny

When the two companies signed the pact in the fall of 2015, they were engaged in 18 lawsuits that ranged from cellular networking to video compression, SMS messaging, and more. Google’s 2011 acquisition of Motorola Mobility, in which the search giant obtained a broad portfolio of patents, touched off a number of the suits and put Google on the offensive against Microsoft, which had been struggling to field a competitive mobile OS. Microsoft, in turn, sued Google for infringing patents related to reassembling an SMS message longer than 160 characters and for patents related to video compression it had originally developed for the Xbox. 

By not cooperating, the two companies are opening themselves to additional antitrust scrutiny. Because the non-aggression pact attempted to head off clashes before they reached regulators, antitrust officials had fewer formal complaints to draw on when opening investigations or filing lawsuits. But without the pact in place, Microsoft and Google are free to complain about each other to whichever regulators or politicians will listen. And today, there seems to be quite a few. 

Microsoft approached UK regulators last year about its problems with Search Ads 360’s inability to keep up with Bing ad formats. It also complained that Google was providing bid details faster for ads on its own search engine. That complaint echoes a similar one brought by the French Competition Authority, which after a two-year investigation found that Google had used other parts of its ad platform—DoubleClick for Publishers and DoubleClick Ad Exchange—to favor its own services by allowing the two halves to work better with each other than with competitors. The settlement in that case will result in Google changing the way its ad tools work with competitors, though not all changes will appear in all markets.

Microsoft has another reason to drop the ceasefire—lately, it hasn’t been subjected to the same level of scrutiny as Google.

While trust-busting sentiment has been ramping up in Congress and taking aim at Big Tech, Microsoft has been relatively unscathed thus far. That’s probably because the company’s recent success has been in markets that haven’t drawn the attention of regulators, including cloud computing and gaming, fields in which the company is a strong competitor, though not clearly dominant. But recently, Microsoft has shown some of its old colors by giving Teams a leg-up on competitors, according to a complaint filed by Slack with the European Commission.

How the detente’s end affects spaces in which Google and Microsoft have openly cooperated remains to be seen. Shortly after the deal was signed, Microsoft released Office apps for Android, and it ditched Internet Explorer for Edge, which runs on Google’s Chromium rendering engine. It’s unlikely that Office will be pulled from the Google Play Store or that Edge will suddenly drop Chromium, but we may see subtle changes that alter just how closely Microsoft embraces Google’s platforms and technologies.

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