In this week's edition of what I found interesting in the global tech policy landscape is the complaint filed by Google with the European Commission regarding Microsoft's anti-competitive licensing practices. This move has brought ongoing tensions in the cloud computing market to the fore and raised significant questions about competition, consumer choice, and regulatory oversight in the tech industry.

The lowdown

Central to the issue is the change in Microsoft's licensing terms, which was introduced in 2019 and allegedly imposed a 400% markup on European businesses wishing to run Windows Server on non-Azure cloud platforms. According to the complaint, companies were forced to pay exorbitant fees to maintain their existing software on rival cloud platforms like Google Cloud and Amazon Web Services (AWS) despite no other technical barriers.

Key allegations

In its complaint, Google also claimed that these restrictions have led to an approximate annual cost exceeding €1 billion for organisations attempting to switch from Microsoft’s Azure platform to other cloud providers. Combined with other alleged measures, such as delaying and limiting security patches for Microsoft software on non-Microsoft infrastructure, this tactic has been perceived as Microsoft's deliberate strategy to maintain dominance in the cloud market while making it difficult for its customers to switch providers without incurring additional costs or risks.

Microsoft's stance

In response to the allegations, Microsoft has defended its licensing practices, arguing that they have made adjustments in recent years to address concerns raised by various stakeholders, including smaller cloud providers. A Microsoft spokesperson also pointed out that previous concerns raised by European companies were settled amicably and that the deals signed therein had brought more competition to the sector.

Historical context

It's not the first time Microsoft has been accused of monopolistic practices by other players in the cloud infrastructure industry.

In 2022, OVHCloud filed a complaint against Microsoft, alleging that it was abusing its position to hurt competition. This was resolved through an anti-trust truce earlier this year, allowing OVHcloud's users to deploy Microsoft's solutions more easily on the cloud provider of their choice.

In 2023, Ofcom, the UK communications regulator, referred the $500bn Cloud Computing Industry to the Competition and Markets Authority for an antitrust investigation after it found that Amazon and Microsoft dominated the market by features, making it more difficult for customers to switch and use multiple suppliers.

Google's complaint also cited previous supporting material, including research from Professor Frederic Jenny, a French economist and chairperson of the OECD competition committee, a study from the CISPE after Microsoft's 2019 licensing changes, and even a 34-page report by the Cybersecurity Review Board deeming Microsoft's security culture as inadequate.

Implications

With allegations of anti-competitiveness in Spain earlier this year, it is highly unlikely that Microsoft will be out of the anti-trust woods in the EU soon. In fact, on the heels of this complaint, the German antitrust authority passed a landmark judgment that has been described as “the first steps towards an investigation into anti-competitive behaviour by Microsoft, including the bundling of online storage service OneDrive in Windows.”

It will be interesting to see how the European Union's assessment of this complaint will impact the regulation of software licensing in an overall competitive and the interplay of larger tech companies with smaller ones, especially given the global focus on regulating digital and technology platforms toward fostering innovation and competition.

Concepts

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