Google claims Microsoft is making it more expensive for customers to use rival cloud services

Google has reportedly made a formal complaint to the UK's antitrust regulator about Microsoft's business practices in the cloud sector.

In a letter to the Competition and Markets Authority (CMA), Google alleges that Microsoft's licensing regime means that customers are unreasonably discouraged from using the services of competitors - even as a secondary provider alongside Microsoft Azure.

"With Microsoft’s licensing restrictions in particular, UK customers are left with no economically reasonable alternative but to use Azure as their cloud services provider, even if they prefer the prices, quality, security, innovations, and features of rivals," reads the letter to the CMA, seen by Reuters.

At issue are changes that Microsoft made to its licensing system last year, relating to the use of Windows or other software licenses in the cloud.

The changes were implemented following complaints to the EU competition watchdog in 2021. They were designed to make it easier for smaller cloud providers to compete, by allowing customers with Software Assurance or subscription licenses to 'install software on any outsourcers' infrastructure'.

Microsoft has since claimed that more than 100 smaller cloud providers have taken advantage of the changes.

However, certain providers – Amazon Web Services (AWS), Google Cloud, Alibaba and Microsoft itself – were excluded from the new arrangements, which Google claims results in higher costs for customers using these companies' services, rather than Microsoft's Azure.

Google Cloud vice president Amit Zavery told Reuters that customers don't face the same problems when using AWS.

"There are some issues, in terms of cloud interoperability, but we can fix that. That's a discussion between providers, which is much understood, and customers are forcing that conversation," said Zavery.

“The problem we run into with Microsoft is that there's no technical issue, but you have licensing restrictions which means we are now being prevented from competing."

Google has reportedly made six recommendations to the CMA, including forcing Microsoft to improve interoperability for customers who are using Azure, as well as other cloud services, and banning the company from withholding security updates from those that make the switch to a different service, according to Reuters.

The CMA is already investigating the UK's cloud computing industry, looking at whether there are competition concerns and, if so, what interventions should be made.

The investigation, launched in October, follows concerns from Ofcom that some suppliers were making it hard to switch by charging fees for moving data out of the cloud; offering discounts to incentivise customers to use only one cloud provider; and creating technical barriers to switching.

It also expressed concerns about Microsoft's licensing practices in particular. The investigation is expected to conclude by April 2025.

Ofcom has estimated that the market for cloud services in the UK was worth up to £7.5 billion in 2022, with AWS and Azure representing up to 80% of the total, and Google accounting for 5-10%.

Microsoft and Google have been approached for comment.