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Google An antitrust case was filed with the European Commission on Wednesday, alleging Microsoft Using unfair licensing contracts to stifle competition in the multi-billion dollar cloud computing industry.
The core of Google's complaint is that Microsoft uses unfair licensing terms to “lock in” customers and exert control over the cloud market.
Google claims that Microsoft, through its dominant Windows Server and Microsoft Office products, can make it difficult for its large number of customers to use anything other than Azure cloud infrastructure products.
The networking giant said in its complaint that restrictions included in Microsoft's cloud licensing terms make it harder for customers to move workloads from Microsoft's Azure cloud technology to a competitor's cloud, even though there are no technical barriers to doing so.
Citing a 2023 study, Google said European businesses and public sector organizations were forced to pay the company up to €1 billion ($1.1 billion) a year as customers were restricted in their ability to switch from one cloud provider to another. The licensing fines are provided by CISPE, the trade body for cloud computing.
In a summary of the complaints, Google ranks third globally in the cloud computing market, lagging behind the market leader. Amazon Web Services and Microsoft Azure each said Microsoft had “compromised cybersecurity and undermined innovation.”
According to Google, if a company runs Microsoft's Office suite of productivity tools and other applications on Google Cloud Platform or other competing clouds, they effectively pay Microsoft a “tax” in the form of high licensing fees.
Google said Microsoft undermines competition in the cloud, citing a study by the UK Competition and Markets Authority that determined Microsoft acquired more than 60% to 70% of all new business in the UK in 2021 and 2022.
Google also said that Microsoft's cloud practices may make enterprises more vulnerable to security issues.
Amit Zavery, head of Google Cloud Platform, told CNBC's Arjun Kharpal on Wednesday that Google believes Microsoft “100%” violated EU antitrust rules.
“We hope that the cloud market will continue to exist and become very dynamic and open to all providers, including European providers, providers like us, AWS and others,” Zavery said.
“Today, these restrictions don't allow customers to have a choice,” Zafri said. “Today, these restrictions don't allow customers to make a choice,” he said, adding that Microsoft added the restrictions after realizing the technology's huge business potential.
“So we want to remove those restrictions and allow customers to own and choose the cloud provider they feel is best for them commercially and technically,” he added.
Zavery told CNBC that Google and broader cloud customers would be “very happy” if Microsoft changed its cloud licensing terms in response to the complaints.
Google's antitrust complaint follows a July settlement between several cloud companies and Microsoft, which will see the company make changes to address competition concerns.
CISPE said at the time that Microsoft would work with its members to release an enhanced version of its cloud infrastructure product Azure Stack HCI to provide the same functionality as Microsoft customers currently using its Azure products.
Google, which is not a CISPE member, said it disagreed with the settlement and chose not to participate in the agreement. Amazon Web Services, a CISPE member, and AlibabaIts cloud unit Alibaba Cloud also chose not to participate in the settlement.
Microsoft, for its part, denies that its cloud practices harm competition. Responding to a cloud market study launched by the UK Competition and Markets Authority, the company said it had “strong confidence that the market for cloud services is working well”.