Microsoft joins CISPE months after settling claim over anti-competitive practices

Is this an attempt to neuter competition and regulators?

Microsoft has joined CISPE only months after the trade association agreed not to pursue the anti-trust complaint it filed with the European Commission in 2022. In doing so, CISPE has effectively removed its chance for recourse should Microsoft fail to deliver fully on its part of the deal.

Microsoft will become the latest member of Cloud Infrastructure Services Providers of Europe (CISPE), with a spokesperson for the trade association confirming to The Register that the group is "representative" of the region's industry "and that includes hyperscalers."

Up until recently, CISPE has been among the most vocal critics of Microsoft’s licencing of Windows Server when it’s used on clouds that aren’t Azure.

The essence of CISPE’s complaint to the European Commission was straightforward: it cost approximately four to five times as much to run Windows Server on any other cloud, and Microsoft created some technical obstacles such as limiting security patching.

As recently as 2023, CISPE argued that Microsoft’s licencing constituted a “software licence tax,” whereby organisations who have already paid for licences are charged again for the freedom to run that software on infrastructure of their own choosing. Research CISPE commissioned found that both the public and private sector in Europe paid up to €1 billion a year to run Microsoft software on non-Azure clouds.

However, CISPE accepted a settlement from Microsoft last July, central to which was an enhanced version of Azure Stack HCI for European cloud providers (Azure HCI Stack for Hosters) to offer features that Microsoft customers using Azure Stack HCI presently have access to. There was also a cash payment, but the details of the amount were not made public.

There are two further interesting features of this agreement. The first was that AWS, Google and Alibaba were specifically excluded from it. The deal was aimed squarely at the Microsoft European cloud partner ecosystem.

Microsoft was given nine months to make good on delivering this product, but that isn’t up until April. CISPE said in its statement about the settlement that it would refile the complaint if it deemed that Microsoft hadn’t delivered at the end of this period. Indeed, the organisation established the European Cloud Observatory to oversee progress, the first report of which is due later this month.

However, it’s highly unlikely that CISPE will refile a complaint against one of its own members, although it should be noted by those puzzled at what looks like CISPE putting a bullet through one of its own feet that AWS is also part of CISPE. This is not an organisation representing small clouds only. Furthermore, Microsoft will not be a voting member, so will not have control over policy.

Nonetheless, it’s hard to envision every member of CISPE being thrilled about the new arrangement.

Meanwhile..

Parallel to these developments, Google filed a complaint broadly similar to the one CISPE withdrew to the European Commission in September. Google argues that, given that Microsoft licensing used to be hardware agnostic, why is it not cloud agnostic? Why should customers who have already purchased Microsoft software licences be penalised for not choosing Azure?

After its attempt to head off the settlement and join CISPE was not successful, Google joined the Open Cloud Coalition in October, which advocates for greater cloud interoperability and innovation.

The CMA is also shortly due to publish its interim judgement on the UK’s cloud services market, with Google and AWS arguing that Microsoft's software licensing practices are limiting genuine competition at a crucial time in the market’s growth.

Another twist in the story came in the form of yesterday’s announcement that former country manager of Amazon UK, Doug Gurr, has been appointed interim chair of the CMA. Yesterday’s statement announcing Gurr’s appointment makes it clear that this should be viewed within the context of the push for economic growth. It is not a coincidence.

Alex Haffner, a competition partner at law firm Fladgate commented:

“Mr Gurr has been appointed on an interim basis, suggesting this is not about succession planning and far more a reaction to current events. His background is also unashamedly commercial as opposed to the consulting one of his predecessor.

“What stakeholders will now be assessing is how the new appointment translates into the CMA’s approach to enforcement. Recent signs are that it has taken heed of criticism of previous decisions and is perhaps more willing to be flexible – the recent Vodafone / Three clearance decision being a case in point.

“However, the new Chair also takes on the role at a time when the CMA has taken on significant new powers under the Digital Markets Competition and Consumer Act, particularly in relation to its oversight of big tech, meaning the CMA will likely become more activist, albeit giving considerable attention as to how to enforce in a way which best stimulates competition and therefore economic growth.”

Whether Mr Gurr’s appointment delays the CMA judgement remains to be seen, but Microsoft may be feeling a little less confident about the outcome.