Google complains to European Commission over Microsoft's anticompetitive cloud practices

Says customers are being charged significantly higher fees to run Windows Server on competing cloud platforms

Google has filed a formal complaint against Microsoft with the European Commission, accusing the Windows maker of anti-competitive practices in its cloud software licensing policies.

The complaint, the first of its kind against Microsoft, alleges that Microsoft's licensing terms for Windows Server operating system are designed to lock customers into its Azure cloud platform.

It further argues that customers are being charged significantly higher fees to run Windows Server on competing cloud platforms like Google Cloud Platform (GCP), creating an unfair advantage for Microsoft's Azure cloud infrastructure offering.

"For years, in the productivity software space, Microsoft has locked customers into Teams, even when they preferred other providers. Now, the company is running the same playbook to push companies to Azure, its cloud platform," Amit Zavery, Vice President and head of GCP, said in a blog post.

"Microsoft's licensing terms restrict European customers from moving their current Microsoft workloads to competitors' clouds – despite there being no technical barriers to doing so – or impose what Microsoft admits is a striking 400% price markup."

Zavery argued that Microsoft is the only cloud provider employing these tactics, which have severely impacted European businesses and governments.

He noted that these practices have not only cost European companies over €1 billion annually but also resulted in negative downstream effects, such as the waste of tax funds, reduced competition, limitations on distributors and channel partners, and increased risk for organisations due to Microsoft's "inadequate" security culture.

The complaint also highlights the potential security risks associated with Microsoft's practices. It suggests that businesses may be more vulnerable to cyberattacks if they are locked into Microsoft's ecosystem.

Google's complaint comes on the heels of a similar complaint filed by the cloud services organisation CISPE against Microsoft in November 2022.

CISPE reached a settlement with Microsoft earlier this year. However, the agreement did not include Google, Amazon Web Services (AWS), or AliCloud, leading to criticism from the first two companies.

Microsoft has denied all these allegations, asserting that its cloud practices are fair and competitive. The company pointed to a recent settlement with European cloud providers as evidence of its commitment to fair competition.

"Microsoft settled amicably similar concerns raised by European cloud providers, even after Google hoped they would keep litigating," a Microsoft spokesperson told CNBC.

"Having failed to persuade European companies, we expect Google similarly will fail to persuade the European Commission."

Google, however, believes that regulatory intervention is necessary to address the issue and ensure fair competition in the cloud market.

"The time to act is now," Zavery said. "The cloud market will get more and more restrictive if things don't happen now."

The European Commission will now investigate Google's complaint, and its findings could have significant implications for the future of the cloud computing industry.

Britain's Competition and Markets Authority (CMA) is also conducting a probe into UK's cloud services market, examining the business practices of the three largest players - Google, Microsoft, and Amazon Web Services (AWS).

Commenting on the issue, Mark Boost, CEO of Civo, said: "Google's complaint to the European Commission is the latest in a growing list of antitrust accusations levelled at Microsoft for its licensing practices. The Spanish Startup Association filed a complaint to its national watchdog, and there's at least three more pending with national and international authorities."

"Recently we've seen high profile complaints like this fall through - notably CISPE's after Microsoft offered a sweetheart deal to its members, leaving the rest of Europe's cloud market behind. This one offers more hope. Google is unlikely to accept any deal from Microsoft, and it's possible that AWS may join the complaint after being frozen out of the CISPE deal."