Google filed an EU antitrust complaint accusing Microsoft of interfering with cloud competition

Google filed an antitrust complaint with the European Commission accused Microsoft using unfair licensing contracts to prevent competition in the multibillion dollar cloud computing industry.

At the heart of Google’s complaint are allegations that Microsoft is using unfair licensing terms to “lock in” clients and control the cloud market.

Google says that Microsoft, through its dominant Windows Server and Microsoft Office products, can make it difficult for a large client list to use anything but its Azure cloud infrastructure offering.

The internet giant said in its complaint that the limitations contained in Microsoft’s cloud license terms make it more difficult for customers to move workloads from Microsoft’s Azure cloud technology to a competitor’s cloud, even if there are no technical barriers to doing so.

European businesses and public sector organizations are forced to pay companies up to 1 billion euros ($1.1 billion) a year in license fines due to restrictions on customers’ ability to switch from one cloud provider to another, Google said, citing a 2023 study by CISPE, a trade body for the sector cloud computing.

The antitrust complaint from Google comes after CISPE and its members in July agreed a settlement with Microsoft that will see the company make changes to address competition concerns.

Referring to the CISPE settlement, Microsoft said in a statement Wednesday that it expects the European Commission to dismiss Google’s complaint.

“Microsoft is addressing the same concerns as the European cloud provider, although Google expects to continue to litigate,” a Microsoft spokesperson told CNBC via email. “Having failed to persuade European companies, we expect Google to also fail to persuade the European Commission.”

In summary of the complaint, Google – which ranks third globally in the cloud computing market behind the market leader. Amazon Web Services and Microsoft Azure, respectively – said Microsoft is “undermining cybersecurity and undermining innovation.”

According to Google, if a company runs the Microsoft Office suite of productivity tools and other applications on Google Cloud Platform or other competing clouds, the company must pay a “tax” in licensing fees to Microsoft.

Google says that Microsoft is destroying the competition in the cloud, and points to the findings of a study by the UK Competition and Markets Authority which determines that Microsoft will get more than 60% to 70% of all new UK business in 2021 and 2022.

Google also suggested that Microsoft’s cloud practices have the potential to make businesses more vulnerable to security issues.

In an interview with CNBC’s Arjun Kharpal on Wednesday, Amit Zavery, head of Google’s Cloud platform, said that Google believes Microsoft is “100%” in violation of EU antitrust rules.

“We want the cloud market to remain and be vibrant and open to all providers including European vendors, vendors like us, AWS and others,” Zavery said.

“Today the limit does not allow choice for the customer,” said Zavery. “Today the restrictions do not allow choice for customers,” he said, adding that Microsoft included restrictions when it realized the commercial potential of the technology.

“So we want to remove those restrictions and allow customers to have and choose whatever cloud provider they think is best commercially and technically,” he said.

Zavery told CNBC that if Microsoft made changes to its cloud licensing terms as a result of the complaint, Google and its wider cloud customers would be “very happy.”

Following the July settlement agreement with Microsoft, CISPE said the tech giant will work with its members to release a version of Azure Stack HCI, its cloud infrastructure product, to offer the same features that Microsoft customers using Azure products currently benefit from.

Google, which is not a CISPE member, said it disagreed with the settlement and chose not to participate in the agreement. Amazon Web Services, which is a CISPE member, and AlibabaCloud unit AliCloud, also chose not to be part of the settlement.

For its part, Microsoft denies that its cloud practices harm competition. In response to a cloud market study initiated by the UK’s Competition and Markets Authority, the company said it was “strongly confident that the cloud services market is performing well.”