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Euro cloud providers react to MS potentially cutting deal on antitrust

Transparency? Redmond's heard of it

Microsoft is close to resolving antitrust complaints lodged against it with the European Commission by local suppliers OVHcloud, Aruba S.p.A and Danish Cloud Community (DCC) over alleged commercial abuses.

The details of the said settlement remain under wraps and likely won't be published in detail, which is frustrating others' efforts to take the US software and cloud giant to task over alleged controlling market behavior.

OVHcloud, Aruba and DCC fired a joint complaint against Microsoft in May, with OVH itself confirming they were pressing the authorities for a "level playing field among cloud providers," saying Microsoft "undermines fair competition."

The complaint was focused on the higher costs of buying and running Microsoft software in clouds other than Azure, and technical adjustments needed to run some programs on competitors' clouds.

Fast-forward to this week and chatty sources close to the situation indicate Microsoft has agreed to settle the case and will propose binding commitments imminently, according to Bloomberg.

A spokesman at Microsoft said it didn't have a statement on the "possible settlement," but it did have something to say more generally about licensing changes.

"In October 2022, we introduced changes to our licensing practices that address the feedback that we heard from European cloud providers," Microsoft said. "We are grateful for the productive conversations that led us there and appreciate the feedback that we have received since. We are committed to the European Cloud Community and their success."

We asked the European-based cloud trio for their perspective and found them all very unwilling to say anything of substance, potentially because the terms of any settlement would be confidential, and also likely would involve a financial element in addition to undertakings by Microsoft.

OVHcloud told us: "Unfortunately, we have no comment on the matter," Aruba S.p.A didn't respond to a quest for comment and Jen Erik Thorndahl' director at DCC, told us: "Thanks for your mail. We have no comment to the case."

Microsoft admitted in May last year that it needed to revise certain software licensing and cloud policies amid threat of a public review of its behavior by the EC. The new terms and conditions contractually imposed by Microsoft dealt with some problems and introduced new ones, sources told us.

Representing 24 cloud providers, the Cloud Infrastructure Service Providers in Europe (CISPE) group itself filed a formal competition complaint against Microsoft in November, saying the vendor uses: "unjustified and discriminatory bundling, tying, self-preferencing pricing and technical and economic lock-in" to "restrict choice".

It claimed the actions of Microsoft were in violation of Article 102 TFEU, and provide grounds for the EC to launch a formal investigation.

Francisco Mingorance, Secretary General at CISPE, which counts OVH, Aruba and many others as members, told us today the decision by the trio to settle with Microsoft was "disappointing on many levels."

He added:

What concerns our members is that it is still not clear what these deals are. They are bilateral and secret, and although we expect something to be offered to everyone across the market (otherwise surely it's just creating new antitrust issues), it is not at all clear what the detail of those changes will be. We've seen only very high-level commitments so far. How will individual vendors know they are getting the same deal as those that complained?

CISPE suspects any deals Microsoft may be cut with the three European cloud providers differ from each other, potentially because the complaints themselves may differ slightly.

Mingorance said its own complaint focused on "discriminatory pricing" in the Microsoft Service Provider Licensing Agreement (SPLA).

"It looks like the new terms will apply through a new program called CSP Hoster and leave the SPLA as it is. Our members' fear that CSP Hoster essentially makes their customers direct customers of Microsoft, as one put it: 'Microsoft's solution to potential competition investigations seems to be to turn cloud infrastructure providers into Microsoft resellers!'

"CISPE is holding its ground," he added. "Although we've had one meeting with Microsoft on these issues, we have not seen anything that encourages us and we'll continue to pursue our complaint. If concessions that solve our issues can be offered, they need to apply to the whole market (all those offering cloud infrastructure services in Europe), be accessible to all customers – every business must be able to run the software it wants in the cloud of its choice without financial, technical or other unfair restrictions, and any solution must be principle-based, future-proof and monitorable to ensure ongoing compliance.

"We still believe that a formal investigation and settlement is the best way forward," Mingorance concluded.

In a statement from the US-based Coalition for Fair Software Licensing, executive director Ryan Triplette claimed: "News that Microsoft is expected to concede and reach settlements with three European cloud providers is an admission of its anticompetitive tactics and unfair licensing practices."

The campaign group launched in the US last year to address local concerns and established a nine-point code of conduct for vendors.

"These private settlements will not resolve or address the company’s restrictive software licensing tactics that continue to limit choice for cloud customers worldwide. Until Microsoft honors its commitment to remedy these concerns, cloud customers will continue to suffer from higher prices and fewer choices."

Germany-based Nextcloud was also a backer of CISPE's complaint and has pointed to German federal authority's decision to launch an informal probe into whether Microsoft has a dominant market position.

That appears cut and dry, given the stranglehold that AWS, Microsoft and Google have in Europe, which along with IBM, Oracle and Salesforce, accounted for 72 percent of customer spending on clouds in calendar Q3.

Frank Karlitschek, CEO at founder at Nextcloud GmbH, said in a statement: "Microsoft continues to act as a gatekeeper, picking the winners and losers. And of course, its own services benefit immensely from this, getting shielded from the competition.

"This brazen effort of promoting its own services at the expense of competitors and distorting the market in their favor harms the consumer, the wider market, and European businesses, and threatens the digital sovereignty of countries."

Microsoft is gaining ground in the game console sector, is investing in AI and the "third pillar" is cloud computing, said Auke Haagsma, former head of unit at the European Commission and a strategic advisor to CISPE last month.

"Cloud services benefit from scale – not just in terms of cost efficiency but in harvesting, mining and driving insights from the masses of data that cross them," he wrote in Euroactiv.

"The cloud, AI and gaming are the foundations of the next wave of growth and innovation in the digital world. Allowing dominance to develop in any one of these areas would stymie European businesses' opportunity to compete and damage the EU's wider digital and sustainability goals. "Allowing one company to dominate all three critical elements would be catastrophic to competition in digital markets," he said. ®

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