Microsoft faces £1 billion lawsuit in UK

Accused of anti-competitive licensing

Microsoft is accused of overcharging thousands of UK businesses and organisations for Windows Server licenses.

A lawsuit filed with the UK's Competition Appeal Tribunal (CAT) by Dr Maria Luisa Stasi - an expert in competition law and digital markets regulation - seeks over £1 billion in compensation for affected parties.

The claim centres on Microsoft's licensing practices for Windows Server, particularly when used on cloud platforms provided by rival companies such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud.

It alleges that Microsoft has been charging higher licensing fees when its software is used on other platforms, compared to when used on its own Azure platform.

Dr Stasi claims Microsoft is leveraging its dominant market position in server operating systems to unfairly penalise businesses that choose alternative cloud providers. She argues that Microsoft's pricing practices have harmed businesses of all sizes, particularly smaller firms.

"This lawsuit aims to challenge Microsoft's anti-competitive behaviour, push them to reveal exactly how much businesses in the UK have been illegally penalised, and return the money to organisations that have been unfairly overcharged," Dr Stasi said.

The legal action is filed on an "opt-out" basis, meaning all UK businesses and organisations that have purchased Windows Server licenses through AWS, GCP or Alibaba Cloud are automatically included in the case unless they choose to opt out.

If successful, it could result in payouts to thousands of British businesses and public sector organisations that claim to have been unfairly charged.

The legal action comes as Microsoft faces increasing regulatory scrutiny over its business practices.

Earlier this year, the company agreed to a €20 million ($21 million) settlement with the European cloud trade body CISPE, which accused Microsoft of unfair pricing policies. As part of the settlement, Microsoft committed to equalising licensing costs for its software across smaller cloud providers and its Azure platform.

Data from Synergy Research Group shows that European cloud firms' market share shrank from 27% to 13% between 2017 and 2022, even as the market expanded fivefold to €10.4 billion ($11 billion).

In September, Google filed a new antitrust complaint with the European Commission, accusing Microsoft of locking businesses into its Azure ecosystem through restrictive licensing terms.

The UK's Competition and Markets Authority (CMA) is also investigating anti-competitive practices in the cloud computing sector, and has announced plans to introduce "behavioural" remedies to address these concerns.

In the US, the Federal Trade Commission (FTC) has launched a comprehensive investigation into Microsoft's business practices, including its cloud computing, software licensing and AI offerings.

The agency has issued a detailed request for information from the company, spanning hundreds of pages. The investigation includes claims that Microsoft's cloud practices make it difficult and costly for customers to move data from Azure to competing providers.

Beyond the cloud, Microsoft's AI investments are also under scrutiny.