Microsoft is under fire from thousands of UK businesses, with a collective lawsuit seeking over £1 billion in damages for alleged anticompetitive practices tied to its cloud licensing policies.
Filed with the UK’s Competition Appeal Tribunal, the case accuses Microsoft of using its dominant market position to impose inflated fees on customers running Windows Server on rival platforms such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud.
Microsoft’s Services Provider License Agreement Under Fire
“Put simply, Microsoft is punishing U.K. businesses and organisations for using Google, Amazon and Alibaba for cloud computing by forcing them to pay more money for Windows Server. By doing so, Microsoft is trying to force customers into using its cloud computing service Azure and restricting competition in the sector,” said Dr. Maria Luisa Stasi, a competition law expert representing the claimants.
“This lawsuit aims to challenge Microsoft’s anti-competitive behaviour, push them to reveal exactly how much businesses in the UK have been illegally penalised, and return the money to organisations that have been unfairly overcharged.”
At the heart of the claim lies Microsoft’s Services Provider License Agreement (SPLA), a licensing program governing how businesses access its software via third-party providers. Under SPLA, businesses that choose non-Azure platforms reportedly face significantly higher costs, creating financial disincentives to use competitors.
FTC Investigates Microsoft’s Cloud Dominance in the U.S.
While the UK lawsuit moves forward, Microsoft’s cloud business is also drawing scrutiny across the Atlantic. The Federal Trade Commission (FTC) is reportedly preparing a formal investigation into allegations that Microsoft imposes restrictive terms to lock customers into its ecosystem.
The investigation centers on claims that Microsoft applies steep exit fees and limits interoperability in Office 365 to make it harder for businesses to migrate to rival platforms.
The FTC inquiry follows a 2023 public comment period during which numerous businesses highlighted Microsoft’s licensing practices as a barrier to competition. Google also filed a formal complaint that year, accusing Microsoft of inflating costs for its software on AWS and GCP while favoring Azure with lower fees.
European Settlements Reveal Persistent Challenges
Microsoft’s licensing practices have also faced regulatory pushback in Europe. In July 2024, the company reached a $21.7 million settlement with the Cloud Infrastructure Services Providers in Europe (CISPE) over allegations that it bundled software with Azure, making it difficult for businesses to switch providers.
Additionally, Microsoft resolved a separate antitrust complaint with French cloud provider OVHcloud, agreeing to modify its licensing policies to allow easier deployment of Microsoft solutions on non-Microsoft platforms. Despite these settlements, European regulators continue to scrutinize the company, with ongoing cases in Spain and other jurisdictions.
The Role of SPLA and Technical Barriers
The Services Provider License Agreement (SPLA), pivotal to the UK claim, allows businesses to license Microsoft software for use on third-party cloud platforms. However, businesses running Windows Server under SPLA agreements reportedly pay significantly more when using AWS, GCP, or Alibaba Cloud compared to Azure. Critics argue this disparity serves as a financial lever to funnel customers into Microsoft’s ecosystem.
Technical barriers further complicate migration. Office 365, Microsoft´s widely-used productivity suite, reportedly lacks full compatibility with non-Azure services, making it challenging for businesses to transition to competitors. These practices have drawn sharp criticism for stifling innovation and limiting market competition.
Microsoft’s dominance in the server operating system market—estimated at 70–80% by the UK’s Competition and Markets Authority (CMA)—has allowed it to exert significant influence over the cloud computing sector. This dominance is bolstered by Azure’s growing integration with artificial intelligence (AI) technologies, such as OpenAI’s ChatGPT.
In Q4 FY2024, Microsoft´s Intelligent Cloud division, which comprises server products and cloud services, saw a revenue increase to $28.5 billion, a 19 percent growth from the previous year. While these expansions have positioned Azure as a leader in AI infrastructure, critics argue they exacerbate competition concerns.
Implications for the Global Cloud Market
The UK lawsuit represents a significant test case, covering thousands of businesses ranging from startups to large enterprises. Many of these organizations, automatically included under the UK’s opt-out system, allege that Microsoft’s licensing practices unfairly inflated their operational costs.
“Collective actions level the playing field and allow organisations to fight back against anti-competitive behaviour from some of the biggest companies in the world,” said James Hain-Cole, a partner at Scott+Scott UK LLP, the law firm representing the claimants.
As regulators in the UK, U.S., and Europe continue to scrutinize Microsoft’s cloud practices, the outcomes of these cases could reshape the competitive landscape for years to come.
