Microsoft settles cloud case for $22 million to avoid EU antitrust investigation

Microsoft has agreed to pay $22 million to settle an antitrust lawsuit filed by a group representing cloud computing companies in Europe, sources said.

According to Reuters, the move will avoid a potentially higher fine from the European Commission.

In 2022, CISPE (Cloud Infrastructure Services Providers Europe) filed a complaint accusing Microsoft of unfair licensing practices that harm the European cloud computing ecosystem.

CISPE is a trade group for cloud service providers with over 35 members, including AWS.

Under the settlement, Microsoft will develop a product that will allow CISPE members to run Microsoft software on their own platforms using Microsoft’s Azure cloud infrastructure at the same prices that Microsoft charges. The product must be delivered within nine months.

Microsoft will also compensate CISPE members for lost revenue 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 satisfied with this out-of-court settlement.

“It is deeply disappointing that CISPE has chosen to accept a ‘bribe’ from Microsoft rather than continue to fight for a solution that benefits European cloud customers,” said Amit Zavery, GM and Head of Platform at Google Cloud. “The way Microsoft bribes complainants instead of addressing the substance of their complaint harms businesses and should not deceive anyone. We are considering our options to continue to fight Microsoft’s anti-competitive licensing to promote choice, innovation and the growth of the digital economy in Europe.”

Zavery said he hopes regulators will continue to investigate Microsoft’s licensing practices.

“We continue to support the growing number of customers, vendors and regulators around the world who are calling on Microsoft to end its discriminatory practices against all customers,” an AWS spokesman said in a statement to Reuters.

Many cloud service providers that are not CISPE members 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 of British cloud services company Civo. “By striking a deal with Microsoft that appears 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.”

According to Synergy Research Group, the European cloud services market is dominated by AWS, Microsoft and Google Cloud, which have a market share of 72%, while the market share of European providers has decreased from 27% to 13% over the past five years.

“No matter how they word it, we can’t avoid what this deal seems like,” Civo’s Boost said. “A global, powerful company is paying for the silence of a trade organization and avoiding the need for fundamental changes to software licensing practices around the world.”

Reuters added that CISPE had agreed to withdraw its complaint to the EU and would not support new complaints on these issues in Europe or elsewhere.

“We are considering options to continue to combat Microsoft’s anti-competitive licensing practices to promote choice, innovation and the growth of the digital economy in Europe,” the report added, quoting Zaveri.

However, the industry body says the event will help service providers reach an agreement.

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

Power in the hands of a select few will drive business models that are more advantageous to them, and in many cases, different across geographies, said Neil Shah, vice president of research and partner at Counterpoint Research. “However, service providers dependent on these players may find the value proposition or pricing of the offering unfair and discriminatory.”

Shah noted that this complaint and settlement will help level the playing field in terms of licensing, pricing and value proposition.

Now everyone sees that hyperscalers can’t regulate themselves, Boost said. He believes that to build a truly competitive cloud landscape, “we need fundamental changes to the way this market works.”

“Hyperscalers have operated without checks and balances for far too long, leaving customers with substandard technology, opaque pricing, and unpredictable billing. Many businesses simply feel trapped in their hyperscaler experience, and services are actively structured to discourage switching to an alternative provider,” Boost added.

Requests for comment to AWS, Microsoft and CISPE remained unanswered.