Microsoft faces new EU antitrust complaint from competing cloud services

A long-standing criticism that Microsoft has set unfair terms for running software services, like Windows, on competitors’ cloud infrastructure might result in EU antitrust scrutiny following a new complaint.

The complaint that Microsoft’s software licensing practices are unfair was filed to the European Commission on Wednesday (9 November) by Cloud Infrastructure Service Providers in Europe (CISPE), a trade association that includes Amazon’s AWS, the French OVHcloud, and the Italian Aruba.

The industry organisation is also one of the main drivers of the Gaia-X initiative, a European data infrastructure project.

The accusation is a long-standing one, as several Microsoft customers in the EU complained already in 2019 that it is prohibitively expensive to run Windows and applications from the Office package on non-Azure cloud platforms such as Google Cloud and AWS.

While Microsoft acknowledged the validity of such claims, few practical changes followed. Therefore, CISPE has been leading the charge against the company, sponsoring in October 2021 a report that analysed alleged anti-competitive practices from Microsoft and Oracle.

In particular, CISPE argues that Microsoft’s dominant position in the adjacent software licensing market was leveraged to give the Seattle-based giant a competitive advantage over the cloud infrastructure market.

In other words, Microsoft is accused of putting rival cloud services on the back foot by charging a higher price for productivity software, foreclosing Bring Your Own License deals, requiring unfair billing practices, making ex-post changes to the license terms and bundling products together to raise their costs.

“Leveraging its dominance in productivity software, Microsoft restricts choice and inflates costs as European customers look to move to the cloud, thus distorting Europe’s digital economy,” said Francisco Mingorance, CISPE’s secretary general.

The complaint landed after the trade association attempted to bring software licensing under the scope of the Digital Markets Act, a recently adopted EU regulation that will introduce a set of dos and don’ts for players so dominant in a critical online market to be designated as ‘gatekeepers’.

For CISPE, Microsoft acts as a gatekeeper, but the lobbying efforts of the AWS-backed association failed and the scope of the DMA was not changed in this direction. Therefore, the only tool left for the trade organisation was a formal antitrust complaint before the European Commission.

To ease off antitrust concerns in the EU, the provider of Windows agreed to change its licensing terms in August to better allow its customers to use Microsoft software services on someone else’s cloud infrastructure.

“The licensing changes we introduced this October give customers and cloud providers around the world even more options for running and offering our software in the cloud. We remain committed to addressing valid licensing concerns and support a competitive environment where all providers can thrive,” a Microsoft spokesperson told EURACTIV.

However, CISPE deems that these changes to the contractual terms only added new unfair practices by extending the self-preferencing practices to more services, not addressing the technical tying of different services and introducing complex reporting obligations.

The trade association put forth a list of potential remedies, namely to put in place an auditable control framework to test compliance with the Ten Principles of Fair Software Licensing, an initiative driven by CISPE and the French trade association Cigref.

It is now up to the European Commission’s competition department to assess the validity of the complaint and decide whether a formal investigation is to be opened into the matter.

The EU executive fined Microsoft more than €1.6 billion in the past decade for antitrust violations. The Big Tech company faces five other complaints from cloud rivals, including OVHcloud and Aruba.

[Edited by Zoran Radosavljevic]


About the author

Related Post

Leave a comment

Your email address will not be published. Required fields are marked *