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⚖️ Has Microsoft been acting unfairly? (a £2 billion question)

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If you take just one thing from this email…

A competition lawyer is leading a class action against Microsoft, claiming their licensing practices make it unfairly expensive for businesses to use Windows on rival cloud platforms. The Competition Appeal Tribunal is deciding if the case should go ahead as a group action, which will mean affected businesses can seek a much bigger amount in damages as a group.

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- Idin

⚖️ Has Microsoft been acting unfairly? (a £2 billion question)

What’s going on here?

Dr Maria Luisa Stasi (a competition lawyer and policy researcher) filed an opt-out class action claim against Microsoft in the UK Competition Appeal Tribunal. The Tribunal is a specialist court that handles cases involving competition and economic regulation.

🤔 What’s an opt-out class action? A class action lets people with similar claims join together for compensation. For opt-out cases, everyone who fits the class definition is automatically included unless they choose not to be. As a result, the class is much bigger. These claims can now cover competition law breaches under changes introduced by the 2015 Consumer Rights Act (in particular Schedule 8).

Dr Stasi claims Microsoft has been overcharging companies for its Windows Server software.

Why has the claim been brought?

Windows Server is an operating system for managing computer networks. To work, it usually needs to be paired with some sort of cloud storage.

Microsoft offers a cloud storage product (Microsoft Azure). But there are other major cloud storage providers, like Amazon Web Services, Google Cloud and Alibaba Cloud.

Non-Microsoft providers have to sign up for agreements known as Service Provider License Agreements (SPLAs). These require providers to pay Microsoft monthly fees to host and deliver Windows Server to their customers.

Dr Stasi claims there are two key issues with this:

  1. Pricing disparity: Users of other cloud providers are charged more for Windows Server under SPLAs than those using Microsoft Azure. This makes it cheaper to run Windows Server on Azure compared to rival platforms.

  2. Licence restrictions: On-premise licence holders (those using Windows Server locally — not on the cloud) can use the software on Azure without paying the licence fee. However, they must pay the fee to use it on a competing cloud platform.

Both these things make it more expensive to use Windows Server on competing platforms, which incentivises customers to stick with Microsoft Azure over its rivals.

Who is being represented here?

The class includes all UK businesses that licensed Windows Server from a non-Microsoft provider during the claim period (from December 2018 onwards). This amounts to around 59,000 organisations.

👆 Extract from the claim form (you can read the full thing here)

Dr Stasi estimates these businesses have lost around £2 billion because of Microsoft’s pricing practices and is seeking damages for this amount.

What happens next?

The Competition Appeal Tribunal must first decide:

  1. If Dr Stasi is a suitable representative for the affected organisations.

  2. Whether a group action is the best way to resolve this issue.

If it’s approved, the case will be heard by a three-member panel, including a Tribunal Chair (an expert in competition law) and two members with expertise in areas like economics, law, business, or technology.

Which law firms are involved?

Dr Stasi is represented by barristers from Brick Court Chambers and One Essex Court, instructed by Scott+Scott, a global firm specialising in complex litigation.

What’s the big picture effect?

UK regulators are increasing their focus on cloud infrastructure.

A couple years ago, OFCOM (the UK’s communications regulator) conducted a study of the cloud computing market and found it’s hard for businesses to switch between providers or use multiple suppliers. This limits competition, making it tough for smaller companies to grow and for new providers to enter the market.

The study flagged concerns about Microsoft and Amazon Web Services, which dominate 80% of the UK market. As a result, OFCOM has referred the market to the Competition and Markets Authority (the UK’s competition watchdog) for investigation.

This is a big move, given how important cloud computing is to UK businesses and consumers.

Law firms advising cloud providers may now need to help clients navigate the CMA investigation, understand its potential outcomes, and adjust their practices to meet any new requirements.

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