Microsoft and Google, two of the world’s greatest monopolies, have been bitter rivals for nearly 20 years. But suddenly, in late April, they announced a startling accord. The companies have withdrawn all regulatory complaints against one another, globally. Rather than fighting their battles in public courts and commissions, they have agreed to privately negotiate.

This is a gentleman’s agreement. The specifics are secret, but the message on both sides is that the deal reflects a change in management philosophy. Microsoft’s new chief, Satya Nadella, is eager to push the vision of a dynamic, collaborative Microsoft, partnering with everyone from Apple to Salesforce.

The most dramatic of these partners is Google, a company that has long been considered Microsoft’s great arch-rival.

The wind started to change in September, just after Sundar Pichai became Google’s chief executive, when the two companies agreed to stop feuding over patents – a first step toward the current agreement. The common corporate line is that the companies want to compete on products, not court cases.



But this public relations gambit masks two far more interesting tales. One is about Microsoft and its desperate chase for relevance. The other is about Google, money and power. Both are part of a broader, deeply worrying narrative – a story about how tech companies are busy redrawing the lines around our lives, and facing little resistance in doing so.

Waste and fury

Nobody ever wants to start a legal fight. Fractious, painful and wasteful, they divert huge resources, often for little productive gain. But this in itself fails to explain Microsoft’s decision to drop pending regulatory complaints against Google in Europe, Brazil and Argentina, as well as to cease funding and participating in lobby groups that it has backed for eight years, such as FairSearch.org and ICOMP, the Initiative for a Competitive Online Marketplace. So what does explain it?

It could be seen as a pragmatic move. Microsoft’s profits still exceed Google’s, but the ratio has been in decline for a decade. Meanwhile, since 2012, Apple has outstripped both companies combined (even if recent figures suggest this momentum might be slowing). A suite of regulatory enquiries into Google’s alleged abuses of its monopoly will continue even in Microsoft’s absence – both in places where Microsoft has filed complaints (Europe, Brazil, Argentina) and in others where it hasn’t, such as India.

With Microsoft’s withdrawal, it is clear that the remaining complainants in these fights – generally small, niche internet businesses – are legitimate critics in their own right. But then again, it takes serious coordination and resources to sustain and succeed in antitrust fights. Winning, especially in a broad and generally impactful manner, is a much taller order without a deep-pocketed supporter such as Microsoft.

New Microsoft

But there’s another possible, rather more cunning, motive. Microsoft today is facing a very different business ecosystem to the one it dominated in the 1990s. It needs to adapt. And it appears to want to do so by positioning itself at the heart of what Satya Nadella describes as “systems of intelligence”.

Explaining this concept at Hannover Messe 2016, Nadella defined systems of intelligence as cloud-enabled digital feedback loops. They rely on the continuous flow of data from people, places and things, connected to a web of activity. And they promise unprecedented power to reason, predict and gain insight.

This is unbridled Big Data utopianism. And it is a vision that brings Microsoft squarely into Google territory. So maybe Microsoft is pulling out of regulatory battles because it doesn’t want to shoot itself in the foot. For emeritus Harvard Business School professor Shoshana Zuboff, this gets to the core of the Google-Microsoft deal.

Google and Microsoft’s shared interest in freedom from regulation outweighs any narrower competitive interests Harvard professor Shoshana Zuboff

Zuboff is a leading critic of what she calls “surveillance capitalism”, the monetization of free behavioral data acquired through surveillance and sold on to entities with an interest in your future behavior. As she explained to the Guardian: “Google discovered surveillance capitalism. Microsoft has been late to this game, but it has now waded in. Viewed in this way, its agreement with Google is predictable and rational.”

And here the most sinister upshot of Microsoft’s decision to stop needling Google with legal disputes becomes clear. “A key theme I write about is that surveillance capitalism has thrived in lawless space,” says Zuboff. “Regulations and laws are its enemy. Democratic oversight is a threat. Lawlessness is so vital to the surveillance capitalism project,” she continues, “that Google and Microsoft’s shared interest in freedom from regulation outweighs any narrower competitive interests they might have or once thought they had. They can’t insist to the public that they must remain unregulated, while trying to impose regulations on one another.”

Standing up to power

What does all this mean for the cases pending against Google? For Maurice Stucke and Allen Grunes, American antitrust experts and co-authors of a comprehensive new book examining the deep and reaching implications of platform and data monopolies, Zuboff’s warning of a lawless alliance among tech giants such as Microsoft and Google only accentuates the demand for rigorous, intellectually led regulatory action. And when it comes to Google, the case for action is in their view clear.

The FTC's failure to take meaningful antitrust action against Google is one of the great failures of all time Allen Grunes, antitrust expert

“The one thing that any antitrust regime absolutely has to do, if it is to be effective, is to stand up to the most powerful companies of the time,” explains Grunes. “Take that away and antitrust ceases to be meaningful.

“The antitrust authorities in the US and EU did that in the case of Microsoft. It required brains, resources and relentless pursuit and commitment.”

Yet only the Europeans, he argues, seem to have the intellectual leadership to be doing it in the case of Google. “The failure of the FTC to take meaningful action against Google is without question one of the great failures of all time.”

Microsoft and Google’s new deal to stop fighting each other is an interesting, strategic corporate move. But it is a move accompanied by a much stronger, deeper play: to collect and capitalize data – including data about us, our behaviors, and our interactions. The challenge for regulators and citizens is complex but essential – and has only just begun.