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Microsoft responds to cloud antitrust complaints

Microsoft has drawn antitrust scrutiny for rules that make it more expensive to run Windows and Office on rivals' clouds. The company promised a fix but has provided no details.

Mike Gleason
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Published: 15 Apr 2022

Microsoft is facing antitrust scrutiny for cloud-licensing practices and has pledged action to fix the issue -- but its plans remain a mystery.

At issue is a set of licensing rule changes that make it more expensive to run Microsoft Windows, Office, Windows Server and SQL Server on cloud services other than Microsoft Azure. In a report Tuesday, Bloomberg spoke to customers affected by the issue, including one that found switching to Google Cloud would cost an extra $50 million in Windows licenses. It's unclear exactly how much expense the rule changes add for the typical customer, though.

Microsoft acknowledged complaints about its rule changes this week.

"While not all of these claims are valid, some of them are, and we'll absolutely make changes soon to address them," Microsoft President Brad Smith said in a statement. "We're committed to listening to our customers and meeting the needs of European cloud providers."

The company did not provide any further details about which complaints it deemed valid or the changes it will make.

European cloud provider trade association CISPE said on Thursday that it does not consider Microsoft's response adequate. The group, which counts AWS as a member, called on Microsoft to fix the issue at once.

"Urgent action is needed, not just a vague commitment to 'learn more and then make some changes,'" CISPE said in a statement. "Until Microsoft makes definitive and effective moves to [resolve the problem], CISPE believes regulators must continue to fully investigate the comprehensive claims against the company."

Though Microsoft's licensing changes went into effect in 2019, many companies are only now seeing the impact, according to Wes Miller, an analyst at Directions on Microsoft.

"Microsoft's world happens in trienniums, [and] we are now at the end of a three-year term," he said. "People are realizing, 'Oh gosh, I've got to take action.'"

Several cloud providers, including France's OVHcloud and the Germany-based Nextcloud, have complained to the European Commission about Microsoft's practices. Reuters reported that commission  has started a probe by sending a questionnaire to the region's cloud companies and customers. Microsoft has drawn the commission's ire in the past, amassing about $1.8 billion in fines during the past decade for antitrust rules violations, according to Reuters.

Microsoft's statement focused on European cloud providers, but the problem is worldwide, Miller said. He added that he hopes Microsoft does not simply make changes in Europe and consider its work done.

"For Office in particular, there has to be a fix," he said, noting the productivity suite's central role in many businesses. "Customers are massively inconvenienced by the changes that were made to Office if they are running, for example, Amazon Workspaces [virtual desktops]."

U.S. government might scrutinize Microsoft as well

Whether Microsoft's behavior runs afoul of U.S. antitrust law is a complicated matter, said Penn State law professor John Lopatka. If Microsoft is using its power in the OS and productivity suite markets to drive companies away from competing cloud providers, that could be considered an anticompetitive practice. However, Lopatka cautioned against drawing conclusions based on the harm to Microsoft's competitors. The possibility that the conduct is anticompetitive does not necessarily mean it is anticompetitive, he said.

"What should be clear is that the antitrust laws in this country are concerned with the welfare of consumers, not rivals," he said.

It remains to be seen how the U.S. government will respond to the issue. There has been heightened scrutiny on tech firms in recent days, and Lopatka said he believes regulators will take a hard look at Microsoft's behavior. The complexity of the problem may dissuade legislators from weighing in, though. Microsoft licensing rules are complicated and ever-changing, Miller said.

"It's very difficult to tear it down to a 'why should I care' issue," he said.

Despite being the dominant force in the OS and productivity suite arenas, Microsoft trails Amazon as a cloud provider. A February report from Synergy Research group had Amazon with about one-third of the market, compared with Microsoft's 21% share.

Mike Gleason is a reporter covering unified communications and collaboration tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.

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