Why the Microsoft/LinkedIn Merger will Stifle Innovation
By Burke Norton, Chief Legal Officer and Chief of Corporate and Government Affairs, Salesforce
If you are a professional today living almost anywhere in the world, you probably have a LinkedIn profile. That profile includes a lot of data — your name, location, current job, past jobs, skills, and, of course, your professional network. It’s a vast dataset composed of 450 million profiles worldwide. No other dataset available anywhere in the world today has anything remotely approaching the scale, scope, quality and accuracy of LinkedIn’s business data. Facebook, Twitter, Google and others don’t have this kind of data.
Now, Microsoft is looking to takeover LinkedIn and become the exclusive owner of this peerless dataset and we have to ask — what will Microsoft do with it? Will they create new products and services that stimulate the market and drive competition? And what are the privacy implications of Microsoft’s use of this data in cloud-based applications? These are the questions now facing regulators as they assess the Microsoft/LinkedIn deal.
If Microsoft gains ownership of LinkedIn, the company will have the ability and incentive to use LinkedIn’s one-of-a-kind dataset to enhance its own products, while preventing competitors from accessing and effectively utilizing that same data. The result will fundamentally change the marketplace in a way that will be harmful to consumers. Even more damaging, Microsoft could end up stifling future innovation in the market at large by further extending to the cloud the same monopolistic position upon which Microsoft has built its traditional franchise.
Microsoft is a particularly problematic acquirer of LinkedIn because of its ability to bundle LinkedIn data, not just with CRM applications, but with its existing dominant businesses — such as Microsoft Office. This is a familiar pattern with Microsoft. In the 1990s, Microsoft tied Internet Explorer to Windows to exclude competitors such as Netscape. More recently, Microsoft Server established control of its market by denying rival platforms interoperability with Windows. And Microsoft Office controls over 80 percent of its market because Microsoft bundled its products (Word, Excel, PowerPoint and Outlook) with Windows to exclude competitors and make it harder for new ones to enter the market. Adding LinkedIn data to its data pools would allow Microsoft to extend its existing Office and Windows monopolies further into enterprise software markets. Indeed, Microsoft’s own people are foreshadowing this turn of events.
Just this month, before the deal has even been completed and Microsoft’s sensitivity to regulatory scrutiny should be at its highest, Microsoft EVP for Cloud and Enterprise Scott Guthrie laid out clearly how Microsoft’s exclusive use of LinkedIn data would give his company an unfair advantage, as well as raising serious privacy concerns: “The [data] from LinkedIn where you know who knows each other, you know the relationships and you know their skill sets, who they worked with in the past; the insight you get from sales reps’ or customer service reps’ inbox with Exchange and what we have in Office 365, the insight you get in someone’s calendar and even with Skype… If you take all that together and have a cloud that can do deep insight of analytics and machine learning and AI on top of that, you create the ultimate selling tool — the ultimate customer support tool in the industry, because you have so much insight that… no one other vendor can provide.”
As made clear in Mr. Guthrie’s statement — and contrary to Microsoft’s claims — the competition issue is not about whether Microsoft will withdraw access to the extremely limited LinkedIn data that is made public today, but the much richer and irreproducible interactivity data, or metadata, to which Microsoft alone will have access. If Microsoft’s plan was to merely use the business-card type of information available from LinkedIn today, which is entirely contrary to Mr. Guthrie’s stated plans, it is highly unlikely that it would have paid $26 billion for the company. Mr. Guthrie candidly describes the anticompetitive effects of this exclusive access as entrenching Microsoft’s market dominance in Microsoft Office and extending it to other products. There is precedent for antitrust authorities around the world to act when a transaction gives a combined company the ability and incentive to exclude competitors in the manner Mr. Guthrie has outlined.
For example, in 2011 the U.S. Department of Justice challenged Google’s acquisition of ITA, the leading provider of data used in online travel search, based on the allegation that the acquisition would give Google the ability and incentive to make exclusive use of the acquired data on its own travel search site and exclude competing online travel search sites from having access to that data. As a condition of allowing the merger to proceed, the DOJ required Google to make the ITA data available to its competitors on fair, reasonable and non-discriminatory terms. In addition, in Europe, EU Competition Commissioner Margrethe Vestager recently stated that “data could be an important factor in how a merger affects competition.”
If this deal is allowed to be completed with the result that access to LinkedIn’s data is reserved exclusively to Microsoft, then businesses of all sizes counting on enhanced innovation and more intelligent cloud services will lose out. Only an open competitive market with an even playing field, such as exists today, can drive the kind of innovation needed to fully realize the potential of cloud, social, mobile and artificial intelligence technologies.
So long as LinkedIn’s data is made available to market participants on a non-exclusive basis, by a company that does not have incentives to discriminate in access to that data, Microsoft, and others, can make use of the data in a way that does not impair competition, and encourages innovation and new market entry for the benefit of customers and consumers.
To be clear, Salesforce itself was engaged in talks to acquire LinkedIn. And if Salesforce had acquired LinkedIn, we would have used the data within our own services appropriately and also licensed it to others. The chances of Microsoft doing the same without government intervention are slim.
Over the coming months, competition and data privacy regulators will need to decide whether, and how, this deal will proceed. For the sake of the millions of businesses — and by extension consumers — who would benefit from an open and innovative market for cloud-based services, we hope they subject this potential transaction to the scrutiny it deserves.