Microsoft’s long-standing criticism of setting unfair terms for software services such as Windows to run on competitors’ cloud infrastructure could lead to an EU cartel review following a new complaint.
The complaint regarding Microsoft’s unfair software licensing practices was filed with the European Commission on Wednesday (November 9) by the industry association of Cloud Infrastructure Service Providers in Europe (CISPE). ), which includes Amazon Web Services (AWS) from Amazon, France’s OVHcloud and Italy’s Aruba.
The industry organization is also one of the main drivers behind the Gaia-X initiative, a European data infrastructure project.
The accusation is not new, as already in 2019 several Microsoft customers in the EU complained about the prohibitive costs of running Windows and Office Pack applications on cloud platforms other than Azure, such as Google Cloud and AWS.
Although Microsoft acknowledged the validity of these claims, few practical changes followed. Therefore, the CISPE association has filed charges against the company and commissioned a report in October 2021 analyzing the alleged anti-competitive practices of Microsoft and Oracle.
In particular, CISPE argues that Microsoft’s dominant position in the adjacent software licensing market has been used to give the American giant a competitive advantage in the market for cloud computing infrastructure.
In other words, Microsoft is accused of putting rival cloud services in trouble by charging a higher price for productivity software, preventing “Bring Your Own License” (BYOL) agreements, imposing unfair billing practices, making subsequent changes to license terms, and combine products to increase costs.
“By leveraging its dominant position in productivity software, Microsoft is limiting choice and driving up costs as European customers look to move to the cloud, causing distortions in Europe’s digital economy.”said Francisco Mingorance, Secretary General of CISPE.
The lawsuit arose after the industry association’s attempt to bring software licenses under the Digital Markets Act (DMA). This newly adopted European regulation will introduce a number of do’s and don’ts for players who dominate a so-called critical online market so much that they will be considered ‘gatekeepers’.
CISPE considers Microsoft to act as a “gatekeeper”, but lobbying by the AWS-backed association failed and the scope of the DMA was not changed accordingly. The only tool still available to the professional organization was therefore a formal anti-competitive complaint to the European Commission.
To ease antitrust concerns in the European Union, the Windows vendor agreed to change its license terms in August to allow its customers to use Microsoft’s software services on Microsoft’s cloud infrastructure.
“The licensing changes we introduced in October give customers and cloud service providers around the world even more options to run and deliver our software in the cloud. We remain committed to resolving valid licensing issues and supporting a competitive environment where all vendors can thrive .”a Microsoft spokesperson told EURACTIV.
However, CISPE believes that these changes to the contract terms have only added new unfair practices by extending the self-referral practice to more services, by not dealing with the technical interconnection of different services and by introducing complex reporting obligations.
The industry association presented a list of potential solutions, including the establishment of an auditable control framework to test compliance with the “Ten Principles for Fair Software Licensing”, an initiative led by CISPE and the French professional association Cigref.
It is now up to the European Commission’s competition department to assess the merits of the complaint and decide whether to open a formal investigation into it.
Over the past decade, the EU director has fined Microsoft more than €1.6 billion for breaching competition rules. The big tech company faces five other complaints from cloud competitors, including OVHcloud and Aruba.