Microsoft and CISPE’s settlement in long-running cloud antitrust dispute proves controversial

The Cloud Infrastructure Service Providers in Europe (CISPE) trade body stands accused of selling its members down the river, after agreeing a $22m deal to withdraw its long-standing anti-trust complaint against Microsoft.

The pair have signed a Memorandum of Understanding (MoU) that commits Microsoft to making an enhanced version of its Azure Stack HCI offering available to European cloud providers that features the same functionality that Microsoft users of that platform enjoy within nine months.

“This collaboration will enable European cloud providers to offer Microsoft applications and services on their local cloud infrastructures, meeting the demand for sovereign cloud solutions and addressing the disruption experienced by European cloud providers and their customers following Broadcom’s acquisition of VMware,” said CISPE, in a statement. 

The MoU is in response to CISPE’s past claims that enterprises and public sector organisations that run Microsoft products on competing cloud platforms miss out on key functionality and end up paying more than users that host the same services in Microsoft Azure.

In exchange, CISPE has agreed to withdraw the formal complaint it filed with the European Commission’s Directorate-General for Competition in November 2022.

The complaint saw CISPE accuse Microsoft of engaging in anti-competitive behaviour that risked “irreparably damaging the European cloud ecosystem and depriving European customers of choice in their cloud deployments”.

If, however, Microsoft fails to deliver on its side of the MoU within nine months, the CISPE can refile its original complaint.

“An independent European Cloud Observatory will be established by CISPE to monitor the development and ongoing evaluation of the product … [and its members will] include Microsoft, cloud infrastructure vendors operating in Europe, and representatives of European customer associations,” CISPE added.

Under the terms of the MoU, CISPE is also prohibited from initiating or supporting complaints about Microsoft’s alleged anticompetitive behaviour in other countries.

“The agreement does not prevent CISPE or its members from complying with regulators’ requests for information and CISPE will continue to campaign for fair software licensing in the cloud,” said CISPE.

The organisation did confirm that CISPE member Amazon Web Services (AWS) was excluded from the negotiations with Microsoft, and that it, along with Google Cloud Platform, will “neither benefit nor be bound” by the terms of the MoU.

According to a report on news site Reuters, Microsoft has agreed to pay a lump sum of $22m to CISPE as part of the agreement to reimburse the organisation for the litigation and campaign costs it has incurred since filing its complaint against the company in November 2022.

Francisco Mingorance, secretary general of the CISPE, described the signing of the MoU as a “significant victory for European cloud providers” and will provide a “level playing field for European cloud infrastructure service providers and their customers”.

Mingorance added: “Microsoft has nine months to make good on its commitment by offering solutions that allow fair licensing terms for its productivity software European cloud infrastructures.”

In a statement, Brad Smith, vice-chair and president of Microsoft, talked up the positive impact the deal stands to have on competition within the European cloud market.

“After working with CISPE and its European members for more than a year, I am pleased that we’ve not only resolved their concerns of the past, but also worked together to define a path forward that brings even more competition to the cloud computing market in Europe and beyond,” said Smith.

However, while CISPE and Microsoft are claiming the deal represents good news for the continent’s cloud providers, the Coalition for Fair Software Licensing (CFSL) is among a number of parties that disagree.

The organisation, which campaigns for fair and transparent licensing terms for cloud users, claims the MoU does not meet the standards that CISPE said it would be holding Microsoft to when news of the pair’s negotiations were made public in April 2023.

At the time, CISPE said any agreement it entered into with Microsoft would be principle-based and apply to all cloud infrastructure providers operating in Europe, which is not the case here because Amazon and Google are excluded from it.

CISPE also said the agreement must also benefit all customers in Europe, and ensure that all businesses have the right to run the software they license on the cloud of their choice, without financial or technical penalties.

Furthermore, it stated that any settlement must be transparent and clear, open to scrutiny, future-proof and auditable for compliance over time.

In its statement, the CFSL said: “Microsoft has failed to meet these requirements in today’s settlement.”

CFSL executive director Ryan Triplette said the agreement looks set to change very little in terms of how the European cloud infrastructure market operates.   

“This settlement is Microsoft’s latest attempt to avoid regulatory scrutiny without addressing the underlying anticompetitive practices that impact millions of cloud customers worldwide,” he said.  

“Even after this agreement is in place, Microsoft will continue to use its unfair software licensing practices to limit choice, drive up costs and lock in customers. A settlement with some smaller European providers that excludes the vast majority of customers and cloud providers does nothing to address Microsoft’s global anti-competitive behaviour.”

He added: “Ongoing complaints and investigations in the UK, throughout the EU, the US, and in other countries, clearly demonstrate Microsoft’s widespread pattern of anticompetitive behaviour and the need for comprehensive solutions that apply to all cloud customers.”

Nicky Stewart, former head of ICT at the UK government’s Cabinet Office, backed the CFSL’s view and said the agreement’s contents leave a lot to be desired.

“CISPE has consistently said that its negotiations with Microsoft will benefit all cloud users and all cloud providers in Europe, but the press notice is ambiguous and looks as if CISPE could have sold non-CISPE EU cloud providers and their users down the river,” she said.

“If that’s the case, it is a pyrrhic victory for CISPE. Cloud providers and consumers across the globe are going to pay the price for a deal that is nothing more than Microsoft greasing a few palms, giving an elite few an unfair advantage over others.”

We cannot shy away from what this deal appears to be: a global, powerful company paying for the silence of a trade body, and avoiding having to make fundamental changes to their software licensing practices on a global basis

She called on the CISPE to reveal more detail on the deal, as the lack of transparency currently on offer risks damaging the organisation’s credibility.

“CISPE will damage its credentials and those of its members if it can’t or won’t divulge the detail of the deal. The only winner will be Microsoft, which avoids a massive fine from the EU, given that CISPE is now withdrawing its complaint, in return for a reported paltry $22m,” she said.

“There should be no more closed-door deals. Our regulators, including the CMA, must insist on complete transparency and openness from both Microsoft and CISPE on the details of the deal, and ensure any benefit is there for all cloud providers and cloud users.”

Mark Boost, CEO of Stevenage-based cloud service provider CIVO, also took issue with how narrow the scope of the deal is, in terms of who stands to benefit from it.

“By making a deal with Microsoft that looks to be exclusive to CISPE members, CISPE members in the EU will receive some short-term benefits, but the cloud industry and their customers will pay the price in the long term,” he said.  

“However they position it, we cannot shy away from what this deal appears to be: a global, powerful company paying for the silence of a trade body, and avoiding having to make fundamental changes to their software licensing practices on a global basis.”

There must be “fundamental changes” to how the cloud market operates, he continued, because customers are losing out.

“To build a truly competitive cloud landscape, we need fundamental changes made in how this market operates. Hyperscalers have operated unchecked for too long, with customers left with underpar technology, opaque pricing and unpredictable billing. Many companies simply feel trapped into using hyperscalers, with services actively structured to disincentivise moving to an alternative provider,” he said.

“Regulators need to take action, and quickly. The CMA’s cloud investigation can ensure the UK forges a different path to the EU. I hope it will not waste this opportunity and take decisive action across the board, including ending the scourge of the skewed system of cloud credits and anti-competitive software licensing.”