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Google & Microsoft Regulatory Disputes Ends

Microsoft Had Filed Complaints Against Google And Funded Industry Groups Aimed At Encouraging Regulators To Go After The Search Giant

microsoft-buildingOne of technology’s most heated rivalries is officially on ice.

Reflecting A Changing Relationship, The Two Sides Drop Complaints To Regulators Around The Globe

 

Microsoft Corp. and Alphabet Inc. ’s Google on Friday agreed to end regulatory battles around the globe, including the European Union, Argentina, Brazil, Canada and India. The truce was ordered by the companies’ relatively new chief executives, Satya Nadella of Microsoft and Sundar Pichai of Google, who have a cordial relationship, unlike their predecessors, according to people close to the companies.

“Our companies compete vigorously, but we want to do so on the merits of our products, not in legal proceedings,” said a Google spokesperson. “As a result, following our patent agreement, we’ve now agreed to withdraw regulatory complaints against one another.”

The entente was months in the making. In September, the companies agreed to dismiss nearly 20 patent-related lawsuits between them. In a joint statement at the time, the companies said they “anticipate working together in other areas in the future to benefit our customers.”

In November, Microsoft dropped out of FairSearch, a group of technology firms that lobbied against Google’s dominance. FairSearch said it would continue without Microsoft’s backing; however, the group “died when Microsoft left,” one FairSearch member said.

Last month, Microsoft left the Initiative for a Competitive Online Marketplace, or Icomp, another European lobbying group that targeted Google. Microsoft in December threatened to pull funding from Icomp unless it refocused “on issues that do not concern Google’s dominance or anticompetitive practices,” according to a former Icomp member, the British comparison-shopping site Foundem. Icomp members agreed, but when Microsoft pressed the group to withdraw its formal complaint against Google with European regulators, its members voted against the move and Microsoft resigned, Foundem said.

Microsoft declined to comment on the specifics of Foundem’s timeline, but a spokesman confirmed the company left FairSearch and Icomp.

Microsoft’s shift can be traced to Mr. Nadella’s start as CEO two years ago. He has made a point of settling long-standing disputes with competitors and dropping long-held institutional biases against making products that work with rival technology such as Apple Inc.’s mobile operating system iOS, Google’s Android and the Linux operating system.

google

Mr. Nadella extended the olive branch just as Google, too, was changing leadership. Last August, it named Mr. Pichai as CEO. Both Messrs. Nadella and Pichai are Indian immigrants; Mr. Nadella was raised in Hyderabad and Mr. Pichai in Chennai.

Like Mr. Nadella, Mr. Pichai isn’t prone to the sort of acrimony that once seemed to define the corner offices of tech. A person familiar said the two leaders speak fairly regularly.

The Google-Microsoft fight was a continuing sideshow in the era when Google ascended as one of tech’s most powerful companies as Microsoft slid from that perch.

Microsoft fought back with lawsuits and complaints, successfully lobbying European regulators to investigate Google on abuse of its dominance in search and mobile. That effort led to formal charges including one filed Wednesday by the EU that contends Google unfairly uses its Android mobile operating system to bolster its position in search.

When Google, in 2004, poached one of Microsoft’s top engineers, Mark Lucovsky, Microsoft’s then-CEO, Steve Ballmer, threw a chair and cursed Eric Schmidt, Google’s CEO at the time, according to documents made public in 2005. Mr. Ballmer at the time called the description “a gross exaggeration” of the events.

Microsoft later enlisted Mark Penn, its chief strategy officer, to come up with a campaign to tar Google. Mr. Penn, who advised presidential bids by both Bill and Hillary Clinton, ginned up the “Scroogled” anti-Google advertising campaign. The campaign included merchandise like a Google-branded mug that read, “Keep calm while we steal your data.”

A year after Mr. Nadella became CEO, Mr. Penn left Microsoft.

Meanwhile, Google had quietly approached regulators to complain about the software company’s practices in tit-for-tat escalations, according to a person close to the company. Mr. Pichai wrote in a blog post in 2009, when he was Google’s vice president of product management, that Google supported the EU’s case that Microsoft harmed competition by making its Internet Explorer the default Web browser on Windows.

“Google believes that the browser market is still largely uncompetitive…because Internet Explorer is tied to Microsoft’s dominant computer operating system, giving it an unfair advantage over other browsers,” Mr. Pichai wrote

Now Google finds itself defending against similar claims in the EU over its practice of requiring makers of Android phones to pre-install its search engine and browser. In addition to the Android case, European regulators have charged Google with unfairly favoring its shopping-comparison site in search results, and they are investigating three other complaints that focus on advertising, local search and web scraping.

 

Natalia Drozdiak and Sam Schechner

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