Microsoft accused of stifling secondhand software market

Second user software licence reseller ValueLicensing has picked up where the 2012 European Economic Area ruling in favour of UsedSoft left off. The company has filed a claim in the High Court in London against Microsoft for abuse of dominance and restrictive contractual practices.

The complaint alleges that Microsoft has stifled the supply of preowned Microsoft licences in the UK and the EEA. According to ValueLicensing, Microsoft abused the power of its dominant position by imposing anti-competitive contractual clauses on organisations, both public and private, restricting the resale of perpetual licences as a condition of agreeing a discount.

ValueLicensing said that this has resulted in higher prices and less choice for customers, who have been steered into cloud-based Office365 and Azure subscriptions. The claim covers perpetual licences for desktop software (Windows, Office and related products), but there may also have been damage relating to licences for other products.

Companies such as ValueLicensing rely on purchasing perpetual licences from organisations that want to reduce their licence count. These excess licences can then be resold to other organisations that want to buy software at a discount.

Speaking to Computer Weekly about the damage to the second user software market, Jonathan Horley, founder and managing director of ValueLicensing, said: “Microsoft has never liked the pre-owned software market. It never engaged in the market. Any pre-owned licence is a direct competitor to Microsoft’s own licences.” Horley said he has become an expert in competition law. “Microsoft entered into anti-competitive agreements with other organisations, many of whom did this unwittingly.”

According to Horley, as organisations move their Microsoft enterprise software licensing agreement onto the cloud, they can either continue with their existing Software Assurance license, which provides a perpetual licence and maintenance subscription, or move to a cloud-based subscription such as Microsoft 365.

“With any transition from perpetual Software Assurance to a subscription-based model, all the perpetual licences should come onto the market,” Horley said, adding that Microsoft has incentivised organisations making the transition to a cloud-based transition to remove their existing perpetual licences. 

“Millions of licences should have come onto the market, giving other organisations an opportunity to choose between subscription and preowned licences,” he said.

Among the licences being lost are those in government departments, as they migrate to cloud-based services. Horley said: “We did some freedom of information requests to councils, police forces and central government, and they said they had relinquished their perpetual software licence contracts due to digital transformation.”

According to Horley, the government departments were not able to transfer their licence internally to other departments.

While many organisations are moving to the cloud, Microsoft is committed to support server software for many years. For instance, mainstream support for SQL Server 2019 does not end until 2025, while extended support will continue until 2030.

Those organisations wishing to expand their on-premise SQL Server footprint will need to purchase extra licences. However, this may be much harder and more expensive if Microsoft prevents resale of licences on the second user market.

ValueLicensing is asking the High Court in London to award damages for the loss it has suffered as a result of Microsoft’s conduct – specifically, lost UK and EEA sales of desktop products in the period 2016 to today, which would have resulted in an estimated gross profit of approximately £270m (€313m).