Germany is monitoring Microsoft to thwart 'anti-competitive practices'

Wants to peer into gaps in DMA to keep Redmond honest in cloud and AI

Germany plans to keep closer tabs on Microsoft to identify and "stop anti-competitive practices" that are not currently covered by the European Commission's Digital Markets Act (DMA), namely cloud computing and AI.

The Bundeskartellamt began inspecting the US megacorp in March 2023 to determine whether it qualifies as a business of "paramount significance" under the German Competition Act, where the designation would give the federal cartel office powers to "intervene early and more effectively" if it identifies unfair behavior.

Microsoft has qualified as such – meaning yet another antitrust watchdog is closely monitoring the way the company plies its trade. Andreas Mundt, president of the Bundeskartellamt, said in a statement to The Reg that Microsoft's products are "omnipresent in companies, authorities, and private households, and have become indispensable."

He highlighted Windows, Office applications, and "many other software products" that are bundled together, tightening the company's grip on customers' wallets.

"Today Microsoft's ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations."

This comes just days after Google Cloud, which has repeatedly protested about the way Microsoft licenses its software in the cloud, issued a formal complaint to the European Commission to prevent its rival from dominating the cloud in the same way it does with on-premises software.

Google claimed Microsoft charges four times more for customers to license on-premises software such as Windows Server in rival cloud infrastructure than with Azure, and pointed to a 2019 policy change that no longer allowed customers to run pre-purchased workloads on any hardware or cloud.

The listed provider alteration effectively twisted customers' arms to choose Azure for reasons of costs, and restricted security updates on third-party clouds. Amit Zavery, vice president of Google Cloud, told us:

The EU cloud market is at an inflection point. I mean, a lot of businesses and organizations do depend on the digital environments and the economy is going to grow based on the digital evolution as well as lot of workloads today remain o-premises.

Google leaned on McKinsey research that shows 70 percent of Windows Server workloads remain in customers' own datacenters, and is worried that as those migrate it will be easier, cheaper, and be seen as more reliable to do so with Microsoft.

"That's when customers decide they need to be able to have a choice of where they want to move to and they should be able to pick any cloud provider which makes sense for them, technically and commercially."

Zavery added: "We're asking the European Commission to act now."

The exec was unsure if the Commission would look to launch a probe under the auspices of the DMA.

"It's up to the Commission in terms of figuring out how they want to resolve it. Our hope is that whatever they choose is something which is fast and fixes the problem for the long term, for the market."

This week, Mundt at the Bundeskartellamt also said its decision applies to the whole of Microsoft, not just individual products or services.

"At the same time Microsoft is subject to the EU provisions applicable to gatekeepers under the Digital Markets Act. However, at this stage the resulting rules, which are enforced by the EU Commission, only apply to the Windows operating system and the LinkedIn network. Based on our decision we can stop anti-competitive practices which are not covered by the DMA."

Germany-based Nextcloud filed a complaint with the Commission's antitrust division in November 2021 to lodge commercial grievances with the way Microsoft bundles products – this is what piqued the interest of local regulators.

Founder and CEO Frank Karlitschek said: "Over the past three years, Nextcloud has submitted extensive documentation and other evidence of anti-competitive behavior by Microsoft. The Federal Cartel Office today determined that Microsoft has particular market power. This is an important step to prohibit future anti-competitive practices by the US company."

So another front in the battle with regulators has opened up for Microsoft, which turned over $245 billion in the 12 months ended June 30 versus $211.9 billion in the prior financial year. The Intelligent Cloud division accounted for $77.7 billion of this sales haul.

Microsoft has so far managed to shut down several local complaints in Europe, forging confidential settlements OVH Cloud, DCC, and Aruba S.p.a, and more recently with a trade body comprising 27 European cloud vendors. The UK's Competition and Markets Authority is probing Microsoft licensing, as is the Federal Trade Commission.

The ever-expanding commercial waistline of Microsoft indicates that customers aren't concerned or have little option to go outside of that particular walled garden.

A Microsoft spokesperson said: "We recognize our responsibility to support a healthy competitive environment and we will strive to be proactive, collaborative, and responsible in working with the Bundeskartellamt. Microsoft is partnering with Germany's most innovative companies, and we're committed to investing in the growth of its digital economy." ®