Microsoft sued in UK over cloud licensing practices

Microsoft is facing legal action in the UK over claims that its licensing practices unfairly increase costs for businesses that use competitor cloud providers such as Amazon, Google, and Alibaba.

According to Reuters, the case, filed by competition lawyer Maria Luisa Stasi at the Competition Appeal Tribunal, could mean that British businesses would collectively claim over £1 billion ($1.27 billion) in damages.

Stasi argues that Microsoft penalises UK businesses for using competitors’ cloud services by imposing higher fees for Windows Server software. She asserts that these practices are intended to push customers toward Microsoft’s Azure platform, thereby reducing competition in the cloud computing sector.

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

Licensing practices under fire

In 2020, Microsoft introduced new licensing fees for running its software on major cloud platforms. Critics claim its changes incentivise customers to favour Azure. According to CMA data, Microsoft has gained more customers than competitors since the fees were implemented.

Across the Atlantic, the US Federal Trade Commission (FTC) has opened an antitrust investigation into Microsoft’s cloud computing practices. According to allegations, the company employs restrictive licensing terms to keep customers from moving to competitors’ platforms.

Microsoft has faced similar challenges in mainland Europe and Ireland. Earlier this year, the company settled an antitrust complaint with the Cloud Infrastructure Service Providers in Europe (CISPE) for €20 million ($21 million), agreeing to standardise pricing between smaller cloud firms and Azure. Google did, however, file a new complaint with the European Commission, accusing Microsoft of leveraging licensing terms to lock customers into the Azure ecosystem.

French cloud provider OVHCloud has voiced concerns over hyperscalers bundling widely-used software with their cloud infrastructure, which limits functionality on third-party platforms. OVHCloud settled its antitrust case with Microsoft in July, dropping complaints after reaching an agreement.

A growing market, shrinking competition

Data from Synergy Research Group shows the issues that European cloud providers face. Between 2017 and 2022, their market share fell from 27% to 13%, despite the overall market growing fivefold to €10.4 billion ($11 billion).

As the CMA’s inquiry nears its conclusion, businesses and regulators around the world are calling for clearer policies to promote competition and ensure fair practices in the cloud computing sector.

(Image by Pixabay)

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Tags: cloud, microsoft