Microsoft urged to do more to address European cloud antitrust complaints

The founding member of a coalition of tech firms that accused Microsoft of anti-competitive behaviour, based on how it sells and packages its cloud services in Europe, has claimed the software giant must do more to address the antitrust complaints being levied against it.

Microsoft published a blog post this week acknowledging the antitrust concerns that have been raised with regulators and authorities about its cloud-related business practices in Europe, which it also used to outline a series of “meaningful” actions it would take to address the issues raised.

As detailed in a report on Reuters last month, these concerns are known to have prompted the European Commission’s antitrust authorities to send a questionnaire to Microsoft customers and competitors, asking for their views on Microsoft’s cloud-related licensing deals.

“The commission has information that Microsoft may be using its potentially dominant position in certain software markets to foreclose competition regarding certain cloud computing services,” the questionnaire said, reported Reuters.

This information is based on complaints filed with the European Commission by several European cloud service providers, including German file sync and share software maker NextCloud and French infrastructure-as-a-service (IaaS) provider OVHcloud.

Nextcloud’s antitrust complaint, filed in early 2021, takes umbrage at the way Microsoft bundles its OneDrive cloud storage service and online collaboration platform Teams in with its flagship Windows operating system. It claims this practice is “aggressively pushing consumers to sign up and hand over their data to Microsoft”.

Nextcloud’s complaint has since won the support of more than 50 tech firms and non-profit organisations, leading to the formation of a coalition that is collectively speaking out against how Microsoft sells and packages its cloud software in Europe. The company has also filed a complaint against Microsoft of a similar nature with Germany’s own antitrust authorities.

In a blog post dated 18 May 2022, Microsoft president and vice-chair Brad Smith said the company was taking “meaningful action” on the complaints being raised against it, including the adoption of five pledges that it claims will shape its approach to doing business in Europe in years to come.

These pledges include commitments to ensuring its “public cloud meets Europe’s needs and serves Europe’s values”, that its platforms are set up to ensure “the success of European software developers” and that it will provide “support for European cloud providers” through partnership.

The remaining two pledges made by Microsoft include a commitment to “ensure our cloud offerings meet European governments’ sovereign needs, in partnership with local trusted technology providers” and a vow to “recognise that European governments are regulating technology, and we will adapt to and support these efforts”.

According to Microsoft, these pledges mark the start of the work it is doing to address regulatory concerns, and are intended to “guide all aspects of our cloud business, enhance transparency for the public, and help us to better support Europe’s technology needs”.

In addition, the company said it was also taking steps to ensure European cloud providers could “more easily host a wider variety of Microsoft products on their cloud infrastructure”.

It added: “This will make European cloud providers more competitive by enabling them to better serve customers.”

While these actions are “broad” they are also not “necessarily exhaustive”, continued Smith. “As I said in a video meeting a few weeks ago with the CEO of a European cloud provider, our immediate goal is to ‘turn a long list of issues into a shorter list of issues’.

“In other words, let’s move rapidly so we can learn quickly. Today we’re taking a big step, but not necessarily the last step we will need to take, and we look forward to continuing feedback from European cloud providers, customers and regulators,” he added.

Speaking to Computer Weekly, Nextcloud CEO Frank Karlitschek said the actions Microsoft was committing to take were indicative of the pressure it is feeling in the wake of the complaints, but there is still more the company should be looking to do.

“The main issue here is that we have a super-dominant position from Microsoft… [It is] really dominating this whole market and this is not healthy,” he said. “That’s not healthy for the open market, that’s not healthy for privacy and it’s not healthy for digital sovereignty for Europe. We want the regulators to do something against it to make sure there’s fair competition and a level playing field.”

In terms of the follow-up action Nextcloud and the coalition would like to see Microsoft take, Karlitschek said a commitment from the company to make parts of its cloud stack open source would be a start.

“Across Europe, you have this movement towards digital sovereignty, where governments want to be in control of their data and applications. So, if you are a government or a company and you use Microsoft or Google or Amazon’s service – even if it’s hosted in Europe – that’s still under US jurisdiction because of the CLOUD Act,” he said.  

“This is what they’re trying to solve here by giving other cloud providers the option to hold this Microsoft stick, but obviously this is not enough, because you still have a dependency to Microsoft because Microsoft is not open source.”

He continued: “Digital sovereignty would only come with open source software. What it has proposed so far is interesting and is a move in the right direction, in response to the pressure it is under, but this is not enough.”

Data from IT market watcher Synergy Research Group in September 2021 shed some light on the impact the US tech giant’s growing hold on the European market was having on the fortunes of local cloud providers.

While the market itself has grown nearly fourfold since 2017 to a value of $8.8bn, European cloud providers have seen their share of the market fall from 27% to 16% during that same time period, although the revenue these firms make has doubled during that time.

Computer Weekly also contacted OVHcloud for its take on Microsoft’s plans, given it has also raised an antitrust complaint against the company with regulators in the past, and received the following statement in response.

“Microsoft acknowledges the merits of our complaint and we can only regret that it has to go as far as mobilising the relevant authorities to secure a level playing field in Europe, where competition is both open and fair,” said the statement.  

“We are now waiting to see the concrete implementation conditions of these resolutions and remain committed to defending a level playing field for the European cloud ecosystem.”