A legal action has been initiated against Microsoft, with accusations of unfair pricing practices that have allegedly led to overcharging customers of competing cloud service providers, seeking damages exceeding £1 billion ($1.27 billion). The case contends that users of Amazon Web Services (AWS), Google Cloud Platform, or Alibaba Cloud — all significant rivals to Microsoft's Azure cloud service — are compelled to pay higher fees for licensing Microsoft's cloud-based Windows Server software when utilizing these competitors' platforms.

Microsoft is said to offer reduced rates for companies operating Windows Server on its Azure cloud compared to other platforms such as AWS, Google Cloud, or Alibaba Cloud. The lawsuit posits that this pricing strategy effectively overcharges businesses that opt for alternative cloud services. It further alleges that Microsoft exploits its dominant position in the market for cloud-based server operating systems to extract higher fees and encourage customers to migrate to Azure.

Maria Luisa Stasi, the claimant and a competition law expert, is advocating for over £1 billion in reparations for the businesses that have been impacted. Microsoft has not provided a response to the lawsuit. Stasi, who leads the law and policy division for the digital rights advocacy organization Article19, stated, "In essence, Microsoft is penalizing UK businesses and institutions for choosing Google, Amazon, and Alibaba for their cloud computing needs by imposing higher costs for Windows Server licenses." She added that this strategy is aimed at compelling customers to adopt Azure and limiting competition within the industry.

Stasi's lawsuit is designed to confront what is perceived as Microsoft's anti-competitive conduct, compel the company to disclose the extent of the illegal penalties imposed on UK businesses, and return the funds to those who have been unjustly overcharged. The lawsuit represents thousands of UK businesses and organizations and operates on an "opt-out" collective action basis, meaning that any potentially affected company is automatically included and may receive compensation if Microsoft is found liable.

Stasi represents the interests of Amazon, Google, and Alibaba's customers but does not represent the companies themselves, according to her spokesperson. This development coincides with the UK's Competition and Markets Authority (CMA) preparing to implement "behavioral" remedies to address anti-competitive practices in the cloud sector, following an extensive investigation. Insiders suggested  last month that a preliminary decision could be announced within the week, although the CMA has not commented on the specific timing and has set a provisional deadline of November to December 2024.

Earlier this year, Microsoft reached a €20 million ($21 million) settlement with the cloud industry association CISPE and its members, resolving an EU antitrust complaint that accused the company of unfair software licensing practices within its cloud division. As part of the agreement, Microsoft consented to charge the same rates for running its software on smaller cloud companies' platforms as it does on Azure.

However, in September, Google filed a new antitrust complaint against Microsoft with the European Commission, the executive arm of the EU. The complaint claimed that Microsoft's software licensing terms effectively lock businesses into the Azure platform, making it more difficult to switch to other services, thereby exerting control over the cloud market.

Solange Viegas Dos Reis, the chief legal officer of the French cloud computing firm OVHCloud, told that some cloud hyperscalers are essentially "bundling two products that should be completely separate" — widely-used software and cloud infrastructure. Dos Reis also highlighted the issue of hyperscalers providing enhanced functionality for their software when it operates on their own cloud services compared to third-party services.

From 2017 to 2022, the market share of European cloud companies dropped from 27% to 13%, lagging behind international competitors as the overall European cloud market expanded fivefold to €10.4 billion ($11 billion), according to data from Synergy Research Group. Dos Reis noted in an interview last week that the issue of software licensing in the cloud has not been previously assessed, and OVHCloud has high expectations for the CMA's cloud competition case. OVHCloud reached its own settlement with Microsoft in July, leading to the withdrawal of its EU antitrust complaint against the American tech giant.