Microsoft sued in UK over cloud licensing practices

Microsoft faces legal action in the UK, saying its licensing practices unfairly increase costs for businesses using rival cloud providers such as Amazon, Google and Alibaba.

according to ReutersThe case, brought at the Competition Appeal Tribunal by competition lawyer Maria Luisa Stasi, could mean collective claims by British businesses for more than 1 billion pounds ($1.27 billion) in damages.

Stasi believes Microsoft is punishing British businesses that use rival cloud services by charging more for Windows Server software. She claimed that these practices are designed to drive customers to Microsoft’s Azure platform and thereby reduce competition in the cloud computing field.

The legal action comes as the UK Competition and Markets Authority (CMA) investigates the country’s cloud computing market. Further results from the investigation into market leaders Amazon AWS, Microsoft Azure and Google Cloud are expected soon. Microsoft’s licensing terms for products such as Windows Server and Microsoft 365 are under review.

Licensing practices criticized

In 2020, Microsoft introduced new licensing fees for running its software on major cloud platforms. Critics claim the changes will incentivize customers to favor Azure. According to the CMA, Microsoft has gained more customers than its rivals since the fee was implemented.

On the other side of the Atlantic, the US Federal Trade Commission (FTC) has launched an antitrust investigation into Microsoft’s cloud computing business. The company allegedly used restrictive licensing terms to prevent customers from switching to rival platforms.

Microsoft faces similar challenges in continental Europe and Ireland. Earlier this year, the company settled with Cloud Infrastructure Services Providers Europe (CISPE) for 20 million euros ($21 million), agreeing to standardize pricing between smaller cloud companies and Azure. However, Google did file a new complaint with the European Commission, accusing Microsoft of using licensing terms to lock customers into the Azure ecosystem.

French cloud provider OVHCloud has expressed concerns about hyperscale providers bundling widely used software with their cloud infrastructure, limiting the capabilities of third-party platforms. OVHCloud settled its antitrust case with Microsoft in July, dropping the complaint after reaching an agreement.

The market continues to grow and competition continues to shrink

Data from Synergy Research Group shows the problems facing European cloud providers. Their market share fell from 27% to 13% between 2017 and 2022, even as the overall market grew five-fold to €10.4 billion ($11 billion).

As the CMA’s investigation draws to a close, businesses and regulators around the world are calling for clearer policies to promote competition and ensure fair practices in cloud computing.

(Image source: Pixar)

See also: UK awards £1bn contract to boost public sector cloud adoption

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