Microsoft’s tactics to win cloud battle lead to new antitrust scrutiny

The power and wealth of the biggest US tech companies have been in the news recently.

Despite a stock market value that has soared to more than $2 trillion on its dominance of various parts of the business software market, it has avoided a repeat of the complaints that made it the most prominent target of antitrust action in the US and Europe at the end of the 1990s.

That is, until now.

Changes to some of the company's core terms of business have caused unrest among some of its largest customers, as well as drawing complaints from rival cloud companies. A broad-ranging, informal antitrust review was one of the results.

According to its critics, Microsoft has used anti-competitive tactics to draw customers to its cloud computing service and away from rivals, in particular Amazon Web Services, which dominates the cloud market. Critics claim that using Windows and Office to feed the growth of the company is a repeat of the illegal activity that took place in the last round of regulatory actions against the company.

Microsoft said it wasn't closing the market by blocking competitors from running its software in their clouds and that it was free to offer more favorable terms to its software customers if they used its Azure service.

Brad Smith, the company's president, conceded that Microsoft had been partially at fault, without pointing to specifics, a marked contrast to the aggressive stance the company took when it faced competition complaints more than two decades ago.

Smith said in a statement that they will make changes soon to address some of the claims. He said that Microsoft was committed to listening to customers and meeting the needs of European cloud providers.

Microsoft became known for its conciliatory stance after its last round of antitrust battles in Washington and Brussels.

One large Microsoft customer, who declined to be named, said that Microsoft's more stringent terms had hit its use of a version of Office running on Amazon's cloud, affecting tens of thousands of its workers. Microsoft delayed the start of the higher licensing fees after the customer complained.

There are signs of regulation. In an informal questionnaire sent to rivals last month, the EU asked about the terms under which it could run Microsoft's software and whether it put it at a disadvantage.

The licensing terms made by Microsoft in October are at the center of the controversy. The change affected the way the company charges for products when they are running in the data centers of Amazon Web Services and other cloud services that compete with Microsoft.

Customers were required to pay an additional license fee even if they had already paid Microsoft for running the software in their own data center. Microsoft's own cloud service, Azure, was included on the list of hyperscale groups affected by the higher charges, though customers were given a special discount that offset much of the increase.

Wes Miller, a former company executive and now an analyst at Directions on Microsoft, said that you can still run all of these products in someone else's cloud, but you must be willing to pay a premium to do that.

The service that was affected was the Workspaces, a service that made it possible to give workers a virtual desktop that looked like a Windows PC but was actually being fed by software in Amazon. The license increases imposed by Microsoft made it more attractive for customers to use the service.

Microsoft said that it made individual parts of Office available to customers who wanted to pay for part of the software.

Microsoft has tried to steer more customers to its own cloud platform by charging higher prices for using its software in rival clouds, according to critics. They said that the end of technical support for certain services added to the pressure on customers to move to Azure.

Another tactic that has come under fire is packaging a number of services together in a single product, even if many customers only require one element.

The highest level of security is only available for customers of the Microsoft 365 package of software if they pay for a premium version known as E5. This bundle requires them to buy many other features, according to the Directions on Microsoft.

The accusations are similar to Microsoft's last round of antitrust battles. They include a complaint that the company made it hard for users of the latest version of Windows to use a browser other than Microsoft's own. Microsoft made it easier for users to change the default browser in Windows.

Most Microsoft customers are on three- or five-year contracts, known as enterprise agreements, meaning that they haven't had a license renewal since the changes in 2019. Microsoft made one-off concessions in licensing negotiations with some customers to delay the impact of the new pricing formula.

Frédéric Jenny, a French antitrust expert, said that even if Microsoft's tactics are not illegal under the current law, they could fall foul of new laws designed to prevent tech companies from favoring their own services.

The Digital Markets Act aims to put new restrictions on companies deemed to be digital.

The company's focus is growing. Michael Silver, an analyst atGartner, said that customers are very frustrated with Microsoft not letting them use the cloud of their choice. He said that the licensing furor seems like a return to the old Microsoft.

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