South Korea’s Fair Trade Commission (KFTC) recently suspended its investigation into Microsoft’s bundling of its AI service, Copilot, with its Windows operating system and Microsoft 365 office software, according to official documents. Copilot is an artificial intelligence (AI) tool that assists with Microsoft applications such as Word, PowerPoint, and Excel. Microsoft bundled Copilot with its dominant Windows OS and Microsoft 365 suite, raising prices in the process. The issue was first raised during a National Assembly audit in October last year. However, after meeting with MS representatives, the KFTC concluded earlier this year that it was “difficult to determine a violation of the law” and effectively ended the probe.
Microsoft’s bundling practices are currently under antitrust investigation in the United States for allegedly undermining market competition. Critics argue that South Korea’s decision to drop its probe effectively gave a free pass to a global tech giant, raising concerns that Microsoft’s dominance could erode the country’s AI software ecosystem and drive up consumer costs. An IT industry insider said, “It’s concerning that Korean regulators are lenient toward big tech companies like Microsoft while applying strict standards to domestic firms.”
After launching Copilot in 2023, Microsoft integrated a dedicated Copilot button into AI-enabled laptops pre-installed with Windows and bundled Copilot into new Microsoft 365 subscriptions. New users had no choice but to purchase Microsoft 365 products with Copilot, which were 30–40% more expensive. Given that Windows holds an 86% share of South Korea’s OS market and Microsoft 365 commands 70% of the document editing market, most users were inevitably exposed to Copilot. Calls from the domestic industry to resume the KFTC’s investigation have grown louder, citing concerns over Microsoft’s use of its market dominance to gain control over South Korea’s AI market.
According to documents obtained by Chosun Ilbo through People Power Party lawmaker Yoo Yeong-ha’s office, the KFTC initiated interviews with Microsoft after the bundling issue surfaced during last October’s audit. However, the agency suspended the investigation, citing the strong presence of ChatGPT (with a 59.7% global market share) and competition from Google’s Gemini as grounds for concluding that Microsoft was not dominant in the global AI market.
Legal experts argue that the KFTC’s approach disadvantages domestic firms. Lee Bong-eui, a professor at Seoul National University School of Law, said, “It’s problematic to assess competition in South Korea’s market solely based on global AI market share,” adding, “Microsoft’s bundling strengthens its dominance in the domestic office software market, where it competes with firms like Hancom.”
The decision also contradicts the KFTC’s previous actions. In July last year, the agency sanctioned Google for bundling YouTube Music, considering its impact on domestic music streaming services like Melon, Bugs, and Genie Music, despite YouTube Music’s weaker position in the global market compared to Spotify. An industry source said, “Microsoft has already partnered with major telecom companies to dominate South Korea’s AI market,” warning that the entire domestic software industry could be affected.
