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European antitrust watchdogs sniff around Microsoft cloud licensing deals

Reportedly has already sent a Q&A to Microsoft cloud rivals, customers

The European Commission is starting to gently probe allegations against Microsoft of anti-competitive practices in the cloud computing industry as it pertains to the company’s licensing rules.

A questionnaire seen by newswires Bloomberg and Reuters was dispatched last month and follows multiple complaints from local providers including OVHcloud and NextCloud, against the Redmond-based Azure public cloud giant.

“We can confirm indeed that the commission has received the complaint,” the EC reiterated in a statement.

Points of interest include whether Microsoft is making it more challenging or more costly for smaller cloud companies to run some of the programs including Windows and Office on rival clouds or if “technical adjustments” are required. Those being quizzed were also asked if they feel it is necessary to incorporate Microsoft products or services into their own infrastructure service “in order to compete more effectively.”

The EC is interested how the licensing terms local cloud providers’ customers receive from Microsoft compare to those that Microsoft itself sells to its own customers, under the Azure Hybrid Benefit Program. This gives customers a discount incentive to run, for example, Windows Server in Azure rather than a rivals’ cloud infrastructure.

The complaints against Microsoft are stacking up: NextCloud fired off one against Microsoft in November over the bundling of Windows with online services.

"This is quite similar to what Microsoft did when it killed competition in the browser market, stopping nearly all browser innovation for over a decade,” said Frank Karlitschek, CEO and founder of Nextcloud GmbH in a statement last November.

France-based OVHcloud filed a complaint to the EC against Microsoft in the summer of 2021, though it was only made public last month as a very involved Commission process means there is no public acknowledgement of the case until months after it is filed. As a matter of interest, only the plaintiff/s who files such a complaint and the defendant (which is not even told the identity of the plaintiff/s until quite late in the process) is aware of it while the commission gathers information.

A spokesperson at OVH said of the November 2021 Microsoft complaint:

"We confirm that several companies including OVHcloud are taking action to ensure a level playing field among cloud services providers operating in the European Digital Single Market, by filing a complaint with DG Competition of the European Commission against Microsoft. According to the plaintiffs, through abusing its dominant position, Microsoft undermines fair competition and limits consumer choice in the cloud computing services market."

This is still very early in the proceedings and there is no guarantee that the EC will launch a formal investigation. The noises being made by the European Union's antitrust chief, Margarethe Vestager, might be music to Microsoft's ears.

Last week she told Reuters that "so far we've had no concerns" about big big tech abusing their dominance in the cloud. Further, Vestager expects the Gaia-X initiative – creating a sovereign European cloud infrastructure – to help balance the equilibrium by giving customers more choice.

The problem is that not all local cloud players are themselves convinced by Gaia-x. Scaleway, for example, dropped out, saying: "The objectives of the Association, while initially laudable, are being sidetracked and slowed down by a polarization paradox which is reinforcing the status quo, that is an unbalanced playing field."

In February, the European Cloud Industrial Alliance wrote an open letter bemoaning the state of digital sovereignty in the region, saying the EU was "rolling out the red carpet to non-EU players who have been repeatedly abusing their position of dominance."

As for Microsoft, it reused the same drawer statement it sent to us last month when OVHcloud's complaint came to light.

"The cloud market is growing and European cloud providers have built successful business models using Microsoft software and services. Cloud providers enjoy many options to provide cloud services to their customers using Microsoft software, whether purchased by the customer or the partner. We're continuously evaluating how we can best support partners and make Microsoft software available to customers across all environments, including those of other cloud providers."

The global cloud infrastructure market grew 34 percent year-on-year in calendar Q4 to $53.5 billion, up a staggering $13.6 billion. AWS was by far the market leader in terms of revenues, followed by Microsoft who is itself well ahead of Google Cloud. In Europe, OVH is the fourth largest player, but it is some way behind all three. ®

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