Dreamforce16 - When legal attacks - Salesforce hits out, Microsoft hits back over LinkedIn

Stuart Lauchlan Profile picture for user slauchlan October 3, 2016
Summary:
On the eve of Dreamforce, Salesforce's Chief Legal Officer ups the rhetoric over LinkedIn as Microsoft denies all accusations of anti-competitive intent.

arguments
The war of words between Salesforce and Microsoft over the anti-trust implications of the former being allowed to take over LinkedIn ramped up today, with claim and counter-claim from the two firms Chief Legal Officers.

For his part, Microsoft’s Brad Smith denied that the firm would attempt to deny third parties, such as Salesforce, from having access to LinkedIn data, while Salesforce’s Burke Norton laid out a more detailed explanation as to why his company has registered its concern with the European Commission about the supposed anti-competition threat that Salesforce says it perceives.

Writing a blog on the eve of the Dreamforce conference, Norton said that the value of the LinkedIn data assets can’t be underestimated:

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.

As a result, he posed a series of questions for regulators, both in Europe - where the takeover has yet to be approved - and in the US - where it has, most notably:

  • Will Microsoft create new products and services that stimulate the market and drive competition?
  • What are the privacy implications of Microsoft’s use of this data in cloud-based applications?

Norton warned that Microsoft would be able to use the 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.

This is all a tone of  language and sabre rattling that’s a million miles away from where the two firms were at this time last year, when Microsoft CEO Satya Nadella was feted as Salesforce's BFF at Dreamforce. Not much chance of that this year as Norton expanded on his argument, claiming:

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.

Microsoft has form here, he added:

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.

Of course, Salesforce attempted to buy LinkedIn itself, but lost out to Microsoft, something that went down very badly with Salesforce CEO Marc Benioff, who complained publicly that he’d have bid more if he’d been given the chance. So, is this all just sour grapes on the past of Salesforce? No, said Norton, there are specific concerns beyond Salesforce’s own interests:

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…it is highly unlikely that it would have paid $26 billion for the company.

It’s essential that openness is the name of the game, concludes Norton, insisting that:

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.

Not us

Not so, said Microsoft’s Smith on a visit to Ireland, telling the Irish Independent newspaper that his firm wasn’t planning to behave in the way that Norton suggests:

It is not something that we have any intention of doing. The LinkedIn data is public today and we want to make that data useful in lots of new ways.

While not explicitly accusing Salesforce of double standards, Smith did argue:

Obviously if Salesforce thought that, as the largest CRM provider, it could buy LinkedIn, as it obviously did, I have to believe that as the fourth largest CRM provider, we can buy LinkedIn.

As for the possibility that the European Commission might launch a formal anti-trust investigation into the takeover bid, Smith said that the noises coming out of Brussels were par for the course so far:

The European Commission has naturally been reviewing with us the whole range of issues. They ask lots of questions as they always do and as they always should. I think they have good questions. I think we have good and clear answers to their questions, so from my perspective this is an acquisition that is going to promote competition.

My take

He said. He said.

Claim and counter-claim.

All eyes must now be on Brussels to see what happens next. If the Eurocrats decide this is a fight it wants to take on, then it could add up to four months to closing the deal, assuming that in the end the Commission does fall into line with its US and Candian regulatory counterparts.

The question now is whether Salesforce can make a compelling enough argument to the Commission in a language that’s going to encourage the Commission to get involved here - and once again, I would love to know how big a role Salesforce board member and former European Commissioner for Competition Neelie Kroes is playing in shaping the message. Or will Microsoft make enough conciliatory noises and issue more reassuring noises about its intentions to hold back the instinctive eagerness on the part of senior Eurocrats to flex their muscles here?

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