Microsoft Has Nine Months to Stop Another Antitrust Battle from Escalating

In a critical move to stave off a prolonged antitrust battle, Microsoft has reached a settlement with Cloud Infrastructure Service Providers in Europe (CISPE), an industry group backed by several European cloud infrastructure providers. This agreement led to CISPE withdrawing its 2022 complaint with the European Commission. However, if Microsoft fails to uphold its commitments within the next nine months, CISPE has vowed to revive its antitrust complaint.

The Antitrust Allegations

CISPE's complaint accused Microsoft of "irreparably damaging the European cloud ecosystem and depriving European customers of choice in their cloud deployments." The group alleged that Microsoft's licensing terms exacerbated existing harms and introduced new forms of tying, lock-in, and customer choice removal. Essentially, CISPE claimed that Microsoft was leveraging its dominance to charge a "tax" on popular products when used outside of its own cloud service, Azure, thus locking in customers and squeezing out competitors.

Terms of the Agreement

Under the new agreement, Microsoft will allow European cloud providers to offer its applications and services on local cloud infrastructures. This means that customers of these providers will gain access to virtual desktop infrastructure based on Windows 11, free extended security updates, and pay-as-you-go licensing for SQL Server through the new version of Azure Stack HCI announced for European providers.

Additionally, Microsoft will compensate CISPE with an undisclosed amount to cover the costs of litigation and fair software licensing campaigns over the past three years. Reuters has reported that this settlement is in the multimillions.

Establishment of the European Cloud Observatory

The agreement also includes the creation of an independent European Cloud Observatory (ECO). This body, comprising Microsoft, European cloud infrastructure vendors, and European customer associations, will issue regular assessments, reports, and recommendations on the implementation of the agreement. This initiative aims to ensure ongoing compliance and fair practices within the European cloud market.

Reactions to the Agreement

CISPE secretary general Francisco Mingorance hailed the agreement as a "significant victory for European cloud providers." However, not all reactions have been positive. AWS, a CISPE member, was excluded from the negotiations and has been critical of the deal. AWS spokesperson Alia Ilyas stated that Microsoft was only making "limited concessions for some CISPE members," leaving the vast majority of Microsoft customers unable to use their cloud provider of choice in Europe and globally.

The Coalition for Fair Software Licensing, another Amazon-linked group, also criticized the settlement. Executive director Ryan Triplette argued that the agreement was Microsoft's latest attempt to dodge regulatory scrutiny without addressing its underlying anticompetitive practices, which continue to limit choice, drive up costs, and lock in customers.

Ongoing Antitrust Scrutiny

Despite this agreement, Microsoft remains under antitrust scrutiny worldwide. UK regulators are investigating Microsoft and Amazon’s cloud licensing practices, while in the US, the Federal Trade Commission is exploring the relationship between cloud service providers and AI developers.

Microsoft president Brad Smith expressed satisfaction with the settlement, stating that the company has been working with CISPE for over a year and is pleased to have resolved their concerns and defined a path forward to enhance competition in the cloud computing market in Europe and beyond.

Conclusion

The agreement between Microsoft and CISPE marks a critical juncture in the ongoing battle over cloud computing market practices in Europe. While it averts immediate antitrust action, the next nine months will be crucial for Microsoft to demonstrate its commitment to fair competition and compliance with the agreed terms. Failure to do so could reignite regulatory challenges, impacting Microsoft's operations and market strategy.

Stay tuned to Kushal Bharat Tech News for further updates on this and other significant developments in the tech industry.