Microsoft has issued serious allegations against Google, claiming that the search giant is planning a “shadow campaign” to undermine Microsoft’s cloud business, Azure. In a scathing blog post, Microsoft’s deputy general counsel, Rima Alailyannounced that Google is on the verge of launching a new lobby group designed to destroy Azure.
According to Microsoft, Google has hired a European lobbying firm to establish this new organization, which will be launched this week. The software giant claims to have learned about this campaign through an unnamed European cloud provider that refused to participate and then alerted Microsoft.
This latest development comes shortly after Google filed an antitrust complaint against Microsoft with EU regulators in September. In the complaint, Google accused Microsoft of unfair licensing practices for Azure. The move follows Microsoft’s settlement with CISPE, a group of European cloud infrastructure providers that had previously raised similar concerns about Microsoft’s licensing terms.
Microsoft stated that Google actively tried to interfere with the settlement with CISPE in July. The company suggested that the recent escalation of hostilities between the two tech giants could signal a return to intense rivalry that mirrors past interactions, like the “Scroogled” campaign and the dispute over Google services on Windows Phone.
This is the full blog post written by Rima Alaily, CVP, Deputy General Counsel, Microsoft
Since moving into my current role at Microsoft nearly seven years ago, I’ve worked hard to be authentic, responsive, and transparent. I’ve tried to tell you the truth, even though it might make things more complicated for Microsoft. I, and hope the people I have been involved with – including journalists, and regulators – will say the same. It is not comfortable or natural for me to write criticisms of others, but in this case, I think it is important because I am concerned when someone attacks us and, I believe, is not honest.
This week the astroturf group organized by Google launched. It is designed to harm Microsoft with competition authorities, and policy makers and mislead the public. Google has gone to great lengths to confuse involvement, funding, and control, particularly by recruiting several European cloud providers, to become the public face of the new organization. When the group launches, Google, we understand, will be a backseat member rather than its leader. It remains to be seen what Google will offer the small company to join, in cash or at a discount.
This latest effort comes as a result of the eventual failure of another organization – CISPE – against Microsoft. In July, when CISPE was on the verge of deciding its complaint against Microsoft, Google offered CISPE members a combination of cash and credits for an astounding $500 million to reject the settlement and continue pursuing litigation. Wisely, he declined. And, instead, CISPE members approved a resolution that had been developed together.
Google’s tactics, unfortunately, go beyond creating an astroturf lobbying organization. He also speaks in his own name in a rude manner and sends paid commentators to destroy us. Why? I suspect a lot of it has to do with the fact that Google is facing a reckoning. In the past two decades, Google’s monopoly of search, digital advertising, and mobile app stores has never faced such a concerted and determined threat as it does today. By our count, there are at least 24 antitrust investigations against Google in the world’s leading digital marketplace. At a time when Google should be focusing on addressing legitimate questions about its business, it’s diverting vast resources to harming others. Disappointingly, with the foundation of their business facing danger, they sought to strengthen their cloud computing service – Google Cloud Platform – by attacking us.
It seems that Google has two main goals in its astroturfing efforts: disrupting the regulatory scrutiny that Google faces around the world by discrediting Microsoft and tilting the regulatory landscape in favor of cloud services over competing on merit.
Google’s new European astroturf lobby organization
We recently learned that, after being rejected by CISPE, Google pivoted to establish its own astroturf lobby organization. It hired a lobbying and communications agency in Europe to create and operate the organization. And recruiting some small European cloud providers to join. One company approached, which ultimately declined, said the organization would be directed and heavily funded by Google for the purpose of attacking Microsoft’s cloud computing business in the European Union and the United Kingdom. Of course, the innocuous recruitment document does not mention Google’s involvement and the real purpose of the organization. We have been informed that the organization will be headed by Nicky Stewartwho personally wrote a complaint against Microsoft and Amazon Web Services (AWS) in the UK Competition and Market Authority investigation into the cloud computing market.
In September, Google took the unusual step of publicly announcing that it had filed a formal complaint about Microsoft’s software licensing practices for the cloud with the European Commission. Most of these complaints are submitted confidentially, but Google took the opportunity to air their concerns. Although it suggests that Google is acting to protect the interests of European customers, the complaints differ. In essence, Google’s argument is that it should not pay Microsoft when it builds and offers cloud services using our intellectual property – ie Windows Server – if the customer has purchased the same software for a completely different use, that is, on the server itself. We disagree. When a streaming service, like Netflix or Disney, includes a movie on their service, they pay for the rights. They don’t get a credit or discount if the customer has a DVD of the same movie. Software and the cloud are no different.
Google also continues, directly and through proxies, to lobby competition authorities around the world to intervene and impose limits on hyperscale cloud competitors, but not itself. Google argues that it should be considered a non-hyperscale or small cloud provider; in effect, it confirms that it is not in the same category as AWS and Microsoft. This reduces credibility. Google may be late to meet the needs of enterprise customers, but it can compete directly with AWS and Microsoft. There is no need for competition authorities to put their toe on the desired scale. Google is the leader in data center capacity, with an operational capacity of 3,500 MW by 2023, more than any other provider. As one of the most valuable companies in the world, the last quarter achieved a growth rate of 29% in its cloud business and invested $13 billion in developing its infrastructure. Let’s hope Google doesn’t win over the misleading competition authority, because the company that loses the most from this will be other non-hyperscale cloud providers around the globe and the customers we serve.
Google shadow campaign pattern
In Europe and in the US, Google has taken a page from its decades-old playbook for prosecuting antitrust enforcers. It’s funding – directly and indirectly – various industry and academic commentators to attack Microsoft and the author’s “studies” that can be cited to discredit us. Assistant Attorney General Jonathan Kanter at the United States Department of Justice recently condemned such tactics as undermining true expertise and antitrust enforcement. Indeed, these commentators often falsify their credentials or mask their affiliations to appear as neutral experts.
Just recently one of these commentators published an op-ed calling for regulatory intervention and rebutting Google’s arguments, citing past relationships with Microsoft and Google, which may seem unfair. We take note, because we have not worked with the author for many years and there is no relationship now. After we raised the issue with the publication, the article was updated to correctly disclose the author’s affiliation with a private consulting firm that counts Google as a client.
Europe is not the only jurisdiction where Google engages in these tactics, and software licensing for the cloud is also a topic that Google uses to attack us behind the scenes.
We understand Google is the main funder of the US-based Coalition for Fair Software Licensing, which has attacked cloud computing businesses in the United States, the United Kingdom, and the EU. The organization is run by a well-known lobbyist for Google in Washington DC, but Google’s affiliation is not publicly disclosed by the organization.
Google has also attacked us on topics ranging from cybersecurity to our business in China, pitching stories to journalists, suggesting questions to congressional offices before hearings, and distributing documents in major capitals around the world. Earlier this year, Google distributed a “fact sheet” in Washington DC to try to address concerns about our approach to the Chinese market. The document is misleading and full of inaccuracies, which we tried to raise directly with Google leaders without resolution.
Google’s work on these various topics underscores the fact that they are less concerned about Microsoft’s actions in the cloud market than undermining competitors wherever they can gain a foothold.
Microsoft’s approach
We’re always listening to our products, licenses, and business strategies, so we try to respond to genuine feedback from our customers, partners, and regulators and make changes as quickly as possible.
This is the basis of our offer to CISPE members. After agreeing to collaborate on technological solutions to overcome the challenges facing the market. It was logical at that time – and continues – that we do not make the same changes to hyperscale providers like Google and Amazon who are very different in the market.
This is also the basis of the changes made proactively to the popular business and enterprise productivity suite last year: creating a version without Team – at a lower price – to expand the options due to concerns raised by the European Commission.
We have made these changes, and more, not because we believe we are doing something wrong, but because we understand that the role and responsibility we have as a global technology company is important and the government’s higher expectations , regulators, policy makers, customers and partners have us.
We’ll continue to listen and evolve when we hear credible, legitimate, and addressable concerns, but as Google continues to demonstrate its actions, the arguments we want you to believe aren’t there.
