Microsoft has attempted to counter claims that its major public cloud competitors, Amazon and Google, are facing unfair disadvantages due to its contentious licensing practices. This defense was presented during a recent submission to the UK’s Competition and Markets Authority (CMA), which is currently conducting an investigation into the cloud market.
On September 16, 2024, the CMA released a summary of information obtained during evidence-gathering sessions held in July with representatives from Amazon Web Services (AWS), Google, and Microsoft. These sessions are part of the CMA’s ongoing anti-trust investigation into the UK cloud infrastructure services sector.
The submissions from all three companies addressed the CMA’s focus on potential anti-competitive behaviors within the UK cloud market. Key areas of concern highlighted by the CMA include the impact of committed spend discounts, data egress fees, and interoperability challenges on market competition. Furthermore, the CMA is exploring allegations related to Microsoft’s cloud licensing practices, specifically claims that it charges customers higher rates for using its software on competing cloud platforms.
Microsoft has faced criticism for purportedly charging more when customers run software from other vendors on its Azure platform. However, the company has consistently asserted that its licensing strategies do not affect AWS or Google’s competitive standing. Microsoft reiterated this position during a summary hearing with the CMA in July 2024.
The company argued that its licensing fees are not significant enough to impede competitors, stating that both AWS and Google have “ample margin” to effectively compete against Azure. Microsoft described these rivals as “listed providers” that serve as important marketing channels, allowing customers to run its software in their environments.
Moreover, Microsoft pointed to the financial performance of AWS and Google as evidence that its practices do not harm their businesses. “It is challenging for Amazon and Google to claim financial strain due to licensing when considering their growth and profitability,” the company noted. Microsoft claimed that licensing fees are trivial compared to the overall cloud revenues of these companies and asserted that neither AWS nor Google has been inhibited in their capacity to invest and remain competitive.
Contrarily, AWS and Google have challenged Microsoft’s perspective, asserting that it is their shared customers who bear the brunt of the financial consequences stemming from Microsoft’s licensing practices. AWS’s submission indicated that Microsoft’s imposed “artificial restrictions” on the use of previously purchased licenses on AWS have led to significant financial repercussions for their customers. AWS stated that customers should have perpetual access to Microsoft products and the freedom to utilize them on any chosen IT provider’s platform.
Google, in its submission, claimed that compliance with Microsoft’s Services Provider License Agreement (SPLA) has hindered its business, citing that its terms make it costlier to run Microsoft workloads compared to Azure. Google indicated that non-price restrictions within the SPLA have limited its competitive ability and led to the loss of business, as it cannot offer certain security updates to customers.
Additionally, Google highlighted the challenges customers face due to legacy software when attempting to migrate away from Microsoft, contributing to customer lock-in situations. The complexity and costs associated with rewriting legacy applications make it difficult for customers to transition from Microsoft platforms, effectively trapping them.
This investigation by the CMA is one of several initiatives worldwide scrutinizing Microsoft’s cloud licensing practices, highlighting ongoing concerns regarding anti-competitive behavior in the industry.