Microsoft faces court battle in £2bn Windows Server class action

A case seeking compensation for approximately 59,000 businesses and organisations using the Microsoft Windows Server operating system in non-Microsoft public clouds is going ahead.

The Competition Appeal Tribunal (CAT) has ruled to certify a £2bn legal action against Microsoft over its cloud computing and software practices. The collective action court case, brought by digital markets regulation expert Maria Luisa Stasi, accuses Microsoft of overcharging UK businesses and organisations that use its Windows Server on rival cloud services.

CAT dismissed Microsoft’s arguments against certification and granted a Collective Proceedings Order on an opt-out basis, allowing the case to head to trial.

Speaking to Computer Weekly at the end of last year, Stasi discussed Microsoft’s dominance. “Microsoft is dominant on some parts of the [IT infrastructure] stack and is using this power to impose things that otherwise will be difficult to accept for business users, and the reality is that they can do that because they limit choice for people,” she said.

“For years, Microsoft’s practices have had real financial impact on both public and private organisations. I’m now looking forward to preparing for trial and getting their money back on their behalf.”

In March this year, the UK Competition and Markets Authority announced it would launch a Strategic Market Status investigation into Microsoft, probing its software licensing practices in the cloud market.

The class action from Stasi involves two aspects of Microsoft licensing. The first is pricing abuse of Microsoft Service Provider License Agreement (SPLA) and concerns Microsoft charging wholesale prices for Windows Server under SPLAs that are higher than those for equivalent licences charged to Azure users.

The second is abuse of re-licensing, which is where Microsoft allows organisations with on-premise Windows Server licences to deploy the server operating system on Azure, without the need to pay re-licensing fees. This is not possible if the customer chooses to deploy Windows Server on a cloud service provider that is listed as approved by Microsoft. Re-Licensing Abuse operates by way of the Azure Hybrid Benefit which is granted to the holder of an on-premise licence.

“We are very pleased with the tribunal’s decision, including its confirmation that Dr Stasi’s action should proceed on an opt-out basis, as sought in her application,” said James Hain-Cole, partner at law firm Scott+Scott, which is leading on the case against Microsoft.

“Certification of this claim is a pivotal step in securing compensation for thousands of businesses and organisations,” he added. “The decision illustrates the importance of the regime for UK businesses who, like consumers, require and deserve the access to justice that it was designed to offer. Looking ahead to the trial, we are proud to be supporting Dr Stasi’s efforts to provide access to justice for those organisations that have suffered as a result of Microsoft’s anti-competitive practices, which remains the target of competition regulators around the world.”

In its ruling, the court dismissed Microsoft’s arguments and allowed the case to head to trial. It also concluded that the claim “comfortably crosses the hurdle of having a real prospect of success”.