Microsoft settles cloud complaint for $22M to avoid EU antitrust probe

Microsoft has reportedly agreed to pay $22 million to settle an antitrust complaint with a group representing cloud computing companies in Europe.

This move avoids a potential larger fine from the European Commission, according to Reuters.

A complaint was filed in 2022 by CISPE (Cloud Infrastructure Services Providers Europe) accusing Microsoft of unfair licensing practices that hurt Europe’s cloud computing ecosystem.

CISPE is a trade group of cloud service providers and includes over 35 members including AWS.

As part of the settlement, Microsoft will develop a product allowing CISPE members to run Microsoft software on their own platforms using Microsoft’s Azure cloud infrastructure at the same prices Microsoft charges. This product must be delivered within nine months.

Microsoft will also compensate CISPE members for lost revenues related to high licensing costs over the past two years. However, this does not include Amazon Web Services and Google Cloud Platform, Reuters added.

Google is not happy with this out-of-court settlement.

“It is very disappointing that CISPE elected to take a ‘payoff’ from Microsoft instead of continuing to fight for a resolution that benefits European cloud customers,” Amit Zavery, GM and head of platform at Google Cloud. “Microsoft’s playbook of paying off complainants rather than addressing the substance of their complaint hurts businesses and shouldn’t fool anyone. We are exploring our options to continue to fight against Microsoft’s anti-competitive licensing in order to promote choice, innovation, and the growth of the digital economy in Europe.”

Zavery expressed hope that regulators would continue to investigate Microsoft’s licensing practices.

“We continue to stand with the growing number of customers, providers, and regulators globally who are calling on Microsoft to end its discriminatory practices for all customers,” Reuters reported quoting an AWS spokesperson.

Many cloud providers who are not part of CISPE are also not happy with this development.

“Today’s deal is not good news for the cloud industry and is a clear signal that the cloud market is fundamentally broken,” said Mark Boost, CEO at UK-based cloud services firm Civo. “By making a deal with Microsoft that looks to be exclusive to CISPE members, CISPE members in the EU will receive some short-term benefits, but the cloud industry and their customers will pay the price in the long term.”

The European cloud market is largely dominated by AWS, Microsoft, and Google Cloud commanding a market share of 72% whereas the European providers’ market share has shrunk to 13% from 27% in the last five years, according to Synergy Research Group.

“However they position it, we cannot shy away from what this deal appears to be,” said Civo’s Boost. “A global powerful company paying for the silence of a trade body, and avoiding having to make fundamental changes to their software licensing practices on a global basis.”

CISPE has agreed to withdraw its EU complaint and will not support new complaints on these issues in Europe or elsewhere, added the Reuters report.

“We are exploring our options to continue to fight against Microsoft’s anti-competitive licensing in order to promote choice, innovation, and the growth of the digital economy in Europe,” the report added quoting Zaveri.

The trade body, however, claims this development will bring the service providers onto the same page.

“This agreement will provide a level playing field for European cloud infrastructure service providers and their customers,” CISPE Secretary-General Francisco Mingorance, said in the report.

The power in the hands of a few will drive business models, which will be more favorable to them and in many cases different across geographies, pointed out Neil Shah, VP for research and partner at Counterpoint Research. “However, those service providers dependent on these players might find the value proposition or pricing for the offering unfair and discriminatory.”

This complaint and settlement would help in level-playing the field regarding licensing, pricing, and value proposition, noted Shah.

It’s now clear for all to see that the hyperscalers cannot self-regulate, said Boost. He feels to build a truly competitive cloud landscape, “we need fundamental changes made in how this market operates.”

“Hyperscalers have operated unchecked for too long, with customers left with under-par technology, opaque pricing, and unpredictable billing. Many companies simply feel trapped into using hyperscalers, with services actively structured to disincentivize moving to an alternative provider,” added Boost.

A request for comment from AWS, Microsoft, and CISPE remained unanswered.