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Google and Microsoft End Their Five-Year Cease-Fire

A non-aggression pact forged by their CEOs expired in April, threatening to add fuel to industry’s antitrust battles

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Microsoft and Google have decided to stop playing nice. 

The two tech giants recently ended a years-long truce during which they agreed not to aim their substantial lobbying firepower against each other. With regulators around the world threatening to impose limits on the power of the biggest technology companies, the two rivals — which compete in web search, cloud computing and artificial intelligence — are now free to step up behind-the-scenes lobbying efforts and public complaints against one another. 

The old non-aggression pact, forged at the time by two new CEOs wanting a fresh start on a formerly acrimonious relationship, had already been fraying before it lapsed in April. The companies feuded publicly over a proposal to force Google to pay news publishers for content and squabbled more quietly over technology for selling search ads. Neither company is eager to extend or renew the alliance, according to people familiar with each companies’ thinking, who weren’t authorized to discuss confidential relationships.

From Microsoft Corp.’s side, the disputes are about giving marketers equal access to search engines when they organize campaigns with Google’s technology, and creating a robust ecosystem for content creators to get paid. Google, a unit of Alphabet Inc., believes Microsoft is objecting because it regards Google as a threat to Microsoft’s Azure cloud-computing and Office productivity businesses. At a time when regulators are training their guns on the whole industry, Microsoft and Google handing them ammo against each other may backfire, leaving both companies and their peers subject to even more scrutiny.

The first signs of strain between the two companies appeared more than two years ago, when Microsoft protested to Google that its Search Ads 360, which lets marketers manage advertising campaigns across multiple search engines, wasn’t keeping up with new features and ad types in Microsoft’s search engine, Bing. That meant it was easier and better for potential advertisers using that system to buy Google spots than Microsoft ones. It seemed to be happening when Bing’s capabilities caught up with an existing Google search feature, said Rik van der Kooi, vice president of Microsoft Advertising. He estimates Google’s moves in ad tech are costing the software maker hundreds of millions in ad revenue every year. It impacts Bing as well as the Yahoo and DuckDuckGo search engines that use Bing technology.

“If you want to advertise, if you want to sell advertising or buy advertising on the internet, you have to use Google's tools, and when they make their tools in a manner that fails to interoperate easily with others, it impacts everybody,” said Microsoft President and Chief Legal Officer Brad Smith in a Bloomberg television interview in April. “We raised the concerns with them and they just turned a deaf ear.”

The companies’ expired agreement on ending existing hostilities and preventing future ones set out a formal, escalating process for handling disputes that might previously have gone directly to regulators. In the current ad-tech quarrel, Microsoft says the two companies followed that process but its concerns about Google’s product still weren’t addressed successfully. Even talks between the companies’ chief executive officers, Microsoft’s Satya Nadella and Google’s Sundar Pichai – the final step in the accord’s predetermined process – failed to produce a resolution.

Under the peace treaty, only once all the efforts laid out in the accord have been exhausted could one company take its grievance to regulators. By last year, Microsoft had spoken with U.K. officials and regulators in some U.S. states about the ad-tech issue. A 2020 report about Google by the U.K.’s competition authority states that Microsoft expressed concerns that Google doesn’t update its SA360 technology with Bing’s latest features, which reduces the amount of money advertisers spend on Bing. Microsoft also said that Google provides quicker bid information to book ads on its website than on Bing. The U.K. conversations were in response to questions put to Microsoft, which was allowed in the agreement with Google, said a person familiar with the matter. Microsoft declined to comment on the terms under which it spoke to the U.S. states. 

An antitrust suit from states led by Colorado against Google notes that Search Ads 360 enables a sophisticated type of automated auction technology used to optimize bids only for Google “while withholding equivalent interoperability from Microsoft.” The Redmond, Washington-based software maker has said Google refused to change anything, while Google officials said the company is working to make the product better for customers.