Google to FTC: Microsoft locks users into Azure
Microsoft is currently the second largest cloud provider in terms of market share, while Google trails behind as a distant third
In a complaint filed with the US Federal Trade Commission (FTC) this week, Google accused Microsoft of using its dominant position to trap customers into contracts within its Azure cloud server business.
Google claimed that Microsoft employs software licencing restrictions as a means to prevent customers from easily transitioning away from its cloud computing services.
The letter, seen by CNBC, was sent in response to a request for information by the FTC regarding the business practices of cloud computing providers, including the market power of providers, their impact on competition and potential security risks.
In its complaint to the competition watchdog, Google contended that Microsoft's dominant Windows Server and Microsoft Office products create lock-in for the firm's extensive client base, making it challenging for them to use alternatives to Microsoft's Azure cloud infrastructure.
Google characterised Microsoft's licencing restrictions as a "complex web" that hinders businesses from diversifying their enterprise software vendors, according to the CNBC report.
The search giant further argued that this level of control poses substantial risks to national security and cybersecurity.
Additionally, Google highlighted the series of cyberattacks that targeted Microsoft products, including the notable SolarWinds breach.
This is not the first time Google has officially filed against Microsoft through antitrust agencies. Earlier this year, the search giant called upon European regulators to scrutinise Microsoft's cloud licencing practices more closely.
Last year, Microsoft agreed to modify its licencing practices in the EU, aiming to enhance affordability for Azure customers seeking to use additional cloud providers. However, those changes did not extend to customers in the US.
After Amazon Web Services (AWS), Microsoft is the second-largest cloud provider in terms of market share; Google trails behind as a distant third.
A senior executive at AWS said last year that while Microsoft had made cosmetic changes to its licences in order to appease European regulators, it is continuing to ensure that its products are more expensive when run on the cloud platforms of its competitors.
In its letter to the FTC, Google also alleged that Oracle's practices were harmful to customers.
It said that companies like Microsoft and Oracle employ complex agreements that aim to bind clients to their ecosystems. These practices not only steer customers toward a monolithic cloud model but also restrict choice, escalate costs, and disrupt growing digital ecosystems, Google added.
A 2020 report [pdf] on competition in digital markets by the US House Subcommittee on Antitrust, highlighted that anticompetitive behaviour is a concern with respect to many cloud platforms, not just Microsoft Azure.
The Coalition for Fair Software Licensing (CFSL), a lobbying group backed by undisclosed IT firms, has also urged the FTC to pay more attention to Microsoft's activities.
"Rather than supporting customer choice, Microsoft is unfairly leveraging customer dependencies to its own benefit," the group said.
In a statement, a Microsoft spokesperson said that the company has made revisions to its cloud licencing terms with the intention of addressing concerns and creating greater opportunities for cloud providers.
"Worldwide, more than 100 cloud providers have already taken advantage of these changes," the spokesperson said.
"And as the latest independent data shows, competition between cloud hyperscalers remains healthy. In the last quarter of 2022 Microsoft and Google made small gains on AWS, which continues to remain the market leader by a significant margin."