Microsoft vs. Google cloud-spat belies anticompetitive reckonings for both

Microsoft has accused Google of building a lobby front in Europe to take action against Microsoft. In a blog post dated Oct. 28, Rima Alaily, Microsoft corporate vice president and deputy general counsel, described the recently founded Open Cloud Coalition (OCC), allegedly financed and controlled by Google, as an “astroturf group.” Its sole aim, according to Alaily, is to discredit Microsoft with competition authorities and political decision-makers and to mislead the public. 

The Open Cloud Coalition apparently launched on Oct. 29, one day after Alaily’s allegation. Founding members of the OCC include international companies such as Centerprise, Civo, Gigas, and Google, as well as British companies such as ControlPlane, DTP Group, Prolinx, Pulsant, Clairo, and Room 101. 

“The OCC is committed to promoting openness, interoperability and fair competition across the cloud landscape and fostering a more innovative, transparent, resilient, and secure cloud ecosystem that benefits customers in the UK, EU and beyond,” the association says. The European competition authorities have been called upon to be “rigorous and bold” in their ongoing review of the cloud sector. 

The OCC said in a statement that it would inform British and EU regulators about the cloud market and at the same time conduct consultations on competition and market fairness. The officials spoke of a crucial time, as regulators across Europe are taking a closer look at the cloud market and are investigating anti-competitive practices by market-dominant companies.

Sovereign European cloud solutions are required — without US hyperscalers

In fact, the cards are being reshuffled in the tech sector, which would also explain the nervousness of some players. The new EU Commission is currently being formed in Brussels. The report by former ECB chief Mario Draghi on Europe’s competitiveness, which Commission President Ursula von der Leyen commissioned a year ago, is looming over everything. The results, which were presented in September 2024, caused some shock waves.

Especially in the tech sector, Draghi ruthlessly reveals what politics and business have missed in recent years and decades. After Europe had already missed the first digital revolution with the Internet, the old world is also in danger of going under with the next big wave of AI. This is also due to the dominance of the US hyperscalers that dominate the global cloud business. Draghi therefore strongly advocates promoting sovereign European solutions. 

Google should deal with its own antitrust problems

In this situation, Microsoft, which has repeatedly been in the crosshairs of European regulators in recent decades, seems to be on edge. In any case, Alaily is lashing out at her competitor. The Microsoft deputy general counsel speaks of a real reckoning. Never in the past two decades have Google’s monopolies in the areas of search, digital advertising, and mobile app stores been as threatened as they are today. There are currently at least 24 antitrust proceedings against Google in the world’s leading digital markets. 

Google should rather focus on answering legitimate questions about its business, warns Alaily. Instead, the competitor is running shady campaigns and spending enormous resources to destroy others. Google is trying to distract from its own intense regulatory scrutiny by discrediting Microsoft and changing the regulatory landscape in favor of its cloud services rather than competing for performance.

Microsoft has been arguing with European cloud providers for many years

Alaily fails to mention that Microsoft itself has been running tough campaigns for many years, always https://www.computerworld.com/article/2503265/microsofts-bundling-of-teams-may-have-violated-eu-antitrust-rules.html. The dispute with the industry association Cloud Infrastructure Service Providers in Europe (CISPE) in particular has been fought with tough tactics in recent years.

The main issue was the way in which Microsoft is integrating its products, such as Microsoft 365 and Windows, ever more deeply with its other software and service products. By abusing its dominant market position, the software giant is undermining fair competition and limiting consumer choice in the cloud services market, complained CISPE representatives. 

Microsoft admitted mistakes in May 2022 and announced that it would take the complaints from cloud competitors seriously and cooperate better in the future.

“As a major technology provider, we are aware of our responsibility,” wrote Brad Smith, president and vice chair of Microsoft, in a blog post. But that was apparently lip service. Microsoft had only added more unfair practices to the long list, the association said in a statement in November 2022. The competitors filed a formal complaint and called on the EU Commission to take action against Microsoft. 

In the past few months, events have unfolded rapidly. In July 2024, CISPE and Microsoft settled their dispute for the time being, the association said in a statement. As part of a letter of intent signed by both parties, Microsoft has committed to making certain changes to dispel the allegations made by the European CISPE members. CISPE will therefore withdraw its complaint against Microsoft. However, CISPE member Amazon Web Services, Google Cloud Platform, and AliCloud, from Chinese provider Alibaba, could not benefit from these conditions, it was said. 

Google complains to the EU Commission about Microsoft

Google then filed a formal antitrust complaint against Microsoft with the EU Commission at the end of September 2024. In it, Google accuses the cloud competitor of anti-competitive and unfair licensing practices. Microsoft is forcing its customers to use its Azure cloud infrastructure through its own pricing policy. Anyone who wants to use Microsoft software such as SQL or Windows Server in competing clouds must expect price increases of up to 400%, Google alleges.  

With these practices, Microsoft has caused considerable damage to European companies and governments, wrote Amit Zavery, then general manager and vice president for Google Cloud [ed. note: Zavery moved to ServiceNow in October 2024], and Tara Brady, president of Google Cloud in the EMEA region, in a blog post. The Google executives estimated the resulting damage to be at least €1 billion per year. This would waste taxpayers’ money, hinder competition, and expose customers to increased risks because they are exposed to Microsoft’s inadequate security culture.

Google managers expressed disappointment at Microsoft’s agreement with CISPE. “Unfortunately, instead of changing its practices, Microsoft has struck one-off deals with a small group of companies,” Zavery and Brady wrote, of the situation. They hinted that further steps are needed to address the complaints “we hear from customers — and from across the industry.” 

Is Google funding propaganda against Microsoft?

In addition to the antitrust complaint, the establishment of the OCC could also contribute to this. Microsoft’s Alaily claims that Google offered CISPE members a combination of cash and loans totaling $500 million to reject the settlement and continue the litigation. Because this attempt failed, Google quickly set up its own lobbying organization. According to Alaily, a lobbying and communications agency in Europe was hired to set up and run the organization. In addition, several small European cloud providers were recruited to join.

“One of the companies approached, who ultimately declined, told us that the organization will be directed and largely funded by Google for the purpose of attacking Microsoft’s cloud computing business in the European Union and the United Kingdom,” she wrote in the blog post.

Alaily speaks of a veritable crusade by Google against Microsoft. The competitor is funding “various industry commentators and academics to attack Microsoft and author ‘studies’ that can be cited to discredit us.” Microsoft also believes that Google is one of the main donors to the US-based Coalition for Fair Software Licensing, which has carried out attacks on its own cloud computing business in the United States, Great Britain, and the EU. The organization is led by a well-known Google lobbyist in Washington, D.C. 

“We are always listening when it comes to our products, licensing, and business strategy, which is why we try to respond to genuine feedback from customers, partners, and regulators and make swift changes,” Alaily claimed of Microsoft’s approach. “We’ve made these changes, and others, not because we believed we were doing something improper but because we understand that the role and responsibility that we have as an important global technology company and the heightened expectations that governments, regulators, policymakers, customers and partners have of us.”

Microsoft has yet to deliver on its promises

However, the software company will have to follow up these words with actions. For Microsoft, everything is far from being a done deal. Much has been promised and little kept before.

“Microsoft has nine months to keep its promise and offer solutions that enable fair licensing conditions for its productivity software in European cloud infrastructures,” said Francisco Mingorance, Secretary General of CISPE, in July. So the clock is ticking. Microsoft must deliver by April 2025 at the latest, otherwise the dispute will start all over again.