According to an informed source, Japan's Fair Trade Commission (JFTC) conducted an unannounced on-site inspection at the Japanese headquarters of Microsoft (MSFT.US) on February 25. The focus of the investigation is whether Microsoft leveraged its dominant position in the operating system and office software markets to improperly promote its Azure cloud platform and restrict competitors. Regulators suspect that Microsoft imposed unfair licensing terms, making it more costly or technically complex for customers to run Windows Server or Microsoft 365 software on third-party platforms like Amazon (AMZN.US) AWS or Alphabet (GOOGL.US) Google Cloud compared to on Azure.
A JFTC spokesperson declined to comment. A representative for Microsoft Japan stated in a declaration that the company is fully cooperating with the commission's requests. This action by the JFTC is not an isolated incident but part of a global regulatory trend addressing "vendor lock-in" practices by major technology firms. Microsoft is engaged in intense global competition with Amazon's AWS and Alphabet's Google Cloud to secure customers in cloud services and artificial intelligence. All three US cloud providers view Japan, with its numerous large corporate groups and banks, as a critical market and have invested significant resources to gain a leading position.
Regulators are concerned that if Microsoft uses its software licensing advantage to effectively force users to adopt Azure services, it could severely harm competition in the cloud market and increase the long-term costs of digital transformation for businesses. Consequently, Japan's antitrust authority is adopting increasingly assertive measures to curb what it perceives as the expanding oligopolistic power of major US tech companies, aligning with actions taken by overseas regulators. Following similar in-depth reviews of bundling practices by the EU and the US, Japan's high-profile intervention signifies a strengthening consensus among major economies on ensuring fair access to cloud infrastructure.
It is noteworthy that last year, the JFTC issued a cease-and-desist order to Google, stating that the Android software provider had required business partners to prioritize promoting its smartphone apps, an alleged abuse of market dominance. With the rapid advancement of generative AI—a technology heavily reliant on high-performance server clusters—the cloud services market is expected to expand significantly. Although Japan has domestic data center operators, which the government is supporting to strengthen national cybersecurity, the dominance of US providers in the local cloud services market remains firm, a situation common in many countries.
Research firm IDC forecasts that Japan's cloud computing market will reach 19 trillion yen (approximately $121 billion) by 2029, nearly double the total in 2024. Simultaneously, the JFTC has explicitly stated its intention to ensure a fair and orderly competitive environment during this critical period of anticipated surging market demand.
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