Following Google, Microsoft (MSFT.US) also faces "knocking": Japan's antitrust crackdown intensifies, and tech giants' cloud businesses face compliance challenges

According to an informed source, Japan’s Fair Trade Commission (JFTC) launched a surprise on-site inspection of Microsoft’s (MSFT.US) headquarters in Japan on February 25. The main focus of the investigation is whether Microsoft has abused its dominant position in the operating system and office software markets to unfairly promote its Azure cloud platform and restrict competitors. The regulators suspect that Microsoft has set unfair licensing terms, making it more costly or technically more difficult for customers to run Windows Server or Microsoft 365 software on third-party platforms like Amazon AWS or Google Cloud compared to Azure.

A spokesperson for Japan’s Fair Trade Commission declined to comment. A Microsoft Japan representative stated in a release that the company is fully cooperating with the FTC’s requests.

In fact, this move by Japan’s Fair Trade Commission is not accidental but a proactive response to the global trend of regulating large tech giants’ “vendor lock-in” practices. Microsoft is engaged in fierce global competition with Amazon (AMZN.US) and Alphabet (GOOGL.US) in cloud services and artificial intelligence, vying for customers in these fields. All three major US cloud providers see Japan as a key market—home to many large corporations and banks—and have invested heavily to secure a leading position there.

Regulators are concerned that if Microsoft leverages its software licensing advantages to coerce users into binding them to Azure services, it could severely harm free competition in the cloud market and increase the long-term costs of digital transformation for enterprises. Therefore, Japan’s antitrust authorities are taking increasingly tough measures to curb what they see as the growing oligopolistic dominance of US tech giants, aligning with the stance of overseas regulators.

As the EU and US have previously conducted in-depth reviews of similar bundling practices, Japan’s high-profile intervention indicates a strengthening consensus among major global economies on fair access to cloud infrastructure. Notably, last year, the Japan Fair Trade Commission issued a cease-and-desist order to Google, accusing the Android software provider of requiring business partners to prioritize promoting its mobile apps, allegedly abusing its market dominance.

With the rapid development of generative AI, the cloud services market is expected to accelerate, heavily reliant on high-performance server clusters. Although Japan has domestic data center operators (with government support to strengthen national cybersecurity), the local cloud market remains firmly dominated by US providers, similar to most other countries.

Research firm IDC predicts that Japan’s cloud computing market will reach 19 trillion yen (about $121 billion) by 2029, nearly double the total in 2024. Meanwhile, the Japan Fair Trade Commission has explicitly stated its intention to ensure a fair and orderly competitive environment during this critical period of surging market demand.