Microsoft hit with £1 billion UK lawsuit for overcharging rivals’ cloud customers and alleged licensing abuse

Microsoft is facing a £1 billion lawsuit in the UK, accused of unfairly overcharging customers who use rival cloud platforms, including Amazon Web Services (AWS), Google Cloud, and Alibaba Cloud. The case, filed by competition lawyer Maria Luisa Stasi, alleges that businesses running Microsoft’s cloud-based Windows Server software on competitors’ infrastructure are forced to pay more than those using Microsoft’s Azure cloud service.

The news comes less than six months after the Richmond-based tech giant and OpenAI were sued by the Center for Investigative Reporting (CIR), the country’s oldest nonprofit newsroom, over copyright infringement.

Allegations of Anti-Competitive Behavior

The lawsuit claims that Microsoft exploits its dominant position in the cloud-based server operating systems market to drive up costs for businesses using alternative platforms. By offering lower prices for running Windows Server on Azure compared to rivals like AWS and Google Cloud, Microsoft allegedly pressures customers to migrate to its own cloud service. Stasi contends this behavior stifles competition and unfairly penalizes UK businesses.

“Microsoft is punishing UK businesses and organizations for using Google, Amazon, and Alibaba for cloud computing by forcing them to pay more for Windows Server,” Stasi told CNBC in a statement. She further accused the company of “illegally penalizing” firms and vowed to recover damages for affected organizations.

Thousands of Businesses Affected

The lawsuit is an “opt-out” collective action, meaning any business impacted is automatically included and could receive compensation if the case succeeds. The total damages sought exceed £1 billion.

Stasi represents the interests of customers using rival cloud services but does not act on behalf of Amazon, Google, or Alibaba. Her goal is to challenge what she describes as Microsoft’s anti-competitive practices and push for transparency in cloud software pricing.

Broader Industry Implications

The lawsuit coincides with a broader probe into cloud competition by the UK’s Competition and Markets Authority (CMA). The regulator is exploring remedies to address anti-competitive practices in the industry, with a provisional decision expected by the end of 2024.

This is not the first time Microsoft has faced scrutiny over its cloud licensing policies. Earlier this year, the company reached a €20 million settlement with the European cloud trade body CISPE, agreeing to align pricing for smaller cloud providers with that of Azure. However, similar complaints persist, including a recent antitrust filing by Google with the European Commission, accusing Microsoft of using licensing terms to lock customers into its ecosystem.

Declining European Cloud Market Share

The controversy comes as European cloud firms struggle to compete with international players. Data from Synergy Research Group shows the market share of European cloud providers dropped from 27% to 13% between 2017 and 2022, despite a fivefold growth in the overall market. Critics argue that practices like bundling software with proprietary infrastructure exacerbate this decline.

French cloud provider OVHCloud, which reached its own settlement with Microsoft earlier this year, expressed optimism about the CMA’s ongoing investigation. “There’s a lot of hope with the CMA’s cloud competition case,” said Solange Viegas Dos Reis, OVHCloud’s chief legal officer.

Microsoft’s Response

Microsoft declined to comment on the lawsuit. The company’s cloud licensing policies have faced growing scrutiny, and this legal action adds to the mounting pressure on one of the biggest players in the cloud computing market. Whether the case will lead to significant changes in how software licensing operates across the industry remains to be seen.