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Microsoft Slammed With £1 Billion Lawsuit Over Alleged Cloud Licensing Practices

Microsoft Slammed With £1 Billion Lawsuit Over Alleged Cloud Licensing Practices

Tech giant Microsoft has been slammed with a lawsuit, accusing the company of overcharging customers using rival cloud platforms.

The legal action seeks damages of more than £1 billion ($1.27 billion), as it alleges that businesses using Amazon Web Services (AWS), Google Cloud Platform, or Alibaba Cloud, which are major competitors to Microsoft’s Azure, are forced to pay inflated prices to license Microsoft’s Windows Server software on these rival infrastructures.

According to the lawsuit, Microsoft offers Windows Server licenses at a lower cost to customers who use Azure, its cloud platform, than to those opting for competing services. This practice, according to the lawsuit, unfairly increases costs for organizations choosing alternative cloud solutions and leverages Microsoft’s dominant position in cloud-based server operating systems to push customers toward Azure.

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Maria Stasi, a competition lawyer and the claimant, is seeking compensation for UK businesses affected by these practices. Stasi argues that Microsoft’s approach is anti-competitive, forcing UK organizations to overpay and restricting fair competition.

In her words,

Microsoft is punishing UK businesses and organizations for using Google, Amazon, and Alibaba for cloud computing by forcing them to pay more money for Windows Server. This lawsuit challenges Microsoft’s anti-competitive behavior and seeks to return the money unfairly overcharged to organizations across the UK.”

The lawsuit coincides with increased regulatory attention from the UK’s Competition and Markets Authority (CMA), which is expected to propose remedies for anti-competitive practices in the cloud sector. A provisional decision from the CMA is anticipated between November and December 2024.

Recall that in June this year, Microsoft reached a €20 million ($21 million) settlement with the EU cloud trade body CISPE to resolve an antitrust complaint over similar licensing issues in Europe. Cloud services organization CISPE, whose members include Amazon and a score of small EU cloud providers, complained to the European Commission in late 2022 alleging that contractual terms imposed by Microsoft on Oct. 1 were harming Europe’s cloud computing ecosystem.

Also, in September 2024, Google filed an antitrust complaint with the European Commission accusing Microsoft of using unfair licensing contracts to stifle competition in the multibillion-dollar cloud computing industry. At the heart of Google’s complaint is the allegation that Microsoft uses unfair licensing terms to “lock in” clients and exert control over the cloud market.

The outcome of the latest lawsuit slammed on Microsoft, and the CMA’s pending decisions could significantly impact competition and licensing practices in the cloud computing industry. While Microsoft’s dominance in the cloud computing market provides it with significant leverage, the lawsuit and regulatory actions could challenge its business practices, leading to potential financial costs, operational adjustments, and reputational risks.

The outcome will not only affect Microsoft’s future strategy but could also reshape competition dynamics in the global cloud computing industry.

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