Microsoft is under increasing scrutiny from the European Union's antitrust arm over its Azure cloud business. The probe comes amid rising concerns that the US tech giant is leveraging its market power to edge out rivals. Bloomberg reports the European Commission (EC) has opened an informal investigation into Microsoft's Azure cloud business. The EC is looking into whether Microsoft is abusing its dominant market position in the cloud computing market to stifle competition.
The EC's investigation is focused on two main areas:
- Whether Microsoft is using its dominant position in the operating system market to give its Azure cloud business an unfair advantage.
- Whether Microsoft is using its relationships with large customers to lock them into its Azure cloud platform.
The investigation, announced on Monday by the European Commission, will examine whether Microsoft is unfairly restricting the ability of its customers and competitors to access and use data stored on its cloud services. Regulators will also look into whether Microsoft is imposing contractual terms that limit the portability and interoperability of data across different cloud providers.
Microsoft Cannot Shake Off Cloud Accusations
The European Commission said that cloud computing is a fast-growing and strategic sector that enables many digital services and innovations.
It added that it wants to ensure that cloud users have a fair choice of providers and that cloud providers can compete on equal terms.
Regulators in the EU were moved into action after several complaints, including a complaint lodged by Cloud Infrastructure Services Providers in Europe (CISPE) last year:
“Microsoft uses its dominance in productivity software to direct European customers to its own Azure cloud infrastructure to the detriment of European cloud infrastructure providers and users of IT services,” CISPE alleged. “The market share of European cloud infrastructure providers has halved in the last 5 years even as the overall market has grown. Microsoft's share of the same market has outperformed all other players who kept stable market shares, growing at the expense, we believe, of European providers, by more than 800%. If allowed to continue, these abuses will inevitably lead to the demise of a European cloud infrastructure sector.”
Microsoft said in a statement that it will cooperate fully with the Commission and that it is confident that its cloud services comply with EU competition rules. It also said that it offers its customers a range of options to store and process their data, including in the EU.:
“The licensing changes we introduced in October give customers and cloud providers around the world even more options for running and offering our software in the cloud,” a spokesperson said.
Microsoft's Previous Concessions May Not be Enough
Microsoft Cloud is making changes to how it works in Europe by overhauling the Microsoft Cloud Solution Provider partner program.
The company announced its intentions in May last year before rolling out changes in October. Concessions came in the wake of a previous European Commission investigation.
In a blog post, Microsoft President Brad Smith points to the following changes that focus on giving more abilities to service providers in Europe:
- “Allow them (cloud service providers) to host Microsoft Office, Windows, Microsoft 365 and Windows 11 apps on their own infrastructure.
- Permit hosting of Windows and Office builds that were bought from Microsoft partners.
- Provide access to Microsoft products at “fixed pricing for longer terms”.”
Those changes were not enough for Google, one of Microsoft's main rivals in the cloud market. In March, Google Cloud President Amit Zavery said Microsoft is still using anti-competition practices. Google argues Microsoft is cherry-picking which vendors it will make deals with because it wants to control the market. In other words, Google accuses Microsoft of not making meaningful changes and just paying lip service to regulators.
“Microsoft definitely has a very anti-competitive posture in cloud. They are leveraging a lot of their dominance in the on-premise business as well as Office 365 and Windows to tie Azure and the rest of cloud services and make it hard for customers to have a choice.”