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Google LLC has accused its longtime cloud rival Microsoft Corp. of engaging in anticompetitive behavior in an official complaint to the U.S. Federal Trade Commission.
The internet giant said in a letter to the FTC today that Microsoft employs software licensing restrictions that effectively force customers to use its Azure cloud computing services in order to save money.
According to CNBC, which obtained a copy of the letter, Google argues that Microsoft takes advantage of the dominant position of Windows Server and Office to pressure customers to use Azure. It spoke of a “complex web” of licensing restrictions that are designed to prevent businesses from diversifying their enterprise software vendors.
The specific loophole Google is referring to is Microsoft’s policy of charging third-party cloud infrastructure providers, such as Google Cloud and Amazon Web Services Inc., a fee to run software like Windows Server and Office on their respective platforms. Those costs are ultimately passed onto customers. But there is no additional fee to run Microsoft’s software on the Azure cloud.
Holger Mueller of Constellation Research Inc. said there’s a long history of software vendors attempting to keep out their competitors through licensing terms. “The basic ploy is that they either limit services by not allowing them to run on other clouds, or they charge more for allowing them to do so,” he said. “It will be up to the courts to decide if Google’s complaint has any merit.”
Google claims that this policy not only amounts to anticompetitive behavior, but it can also be interpreted as a national security and cybersecurity risk. It noted that Microsoft has been hit by numerous cyberattacks in recent years, citing the SolarWinds breach as one example.
Google sent its letter in response to a request for comment by the FTC in March. Specifically, the FTC was looking for comments on how cloud provider’s business practices impact competition.
The cloud computing industry is a fiercely competitive market with billions of dollars in annual revenue at stake. It’s currently dominated by AWS, with Microsoft Azure clearly established in second place, and Google Cloud a distant third. The dominant position of these three companies has led to increased regulatory scrutiny of late, at a time when an increasing number of enterprises are moving their information technology services to the cloud.
Charles King of Pund-IT Inc. said it’s clear enough that Microsoft leverages its dominance in business applications to heighten the appeal and stickiness of its cloud-enables apps and services. “But whether or not that qualifies as being anti-competitive depends on one’s point of view,” he said. “Google Cloud itself offers cloud-based services to enhance its own business-focused apps. The larger point is whether Microsoft’s business practices hinder or prevent customers from considering and employing other applications and cloud-based options. Google believes that it is a question best answered with legal remedies.”
The protest from Google might seem a bit rich, coming from a company that is currently fending off a number of antitrust investigations into its own business practices. The U.S. Department of Justice has two active lawsuits against Google over its online advertising and search businesses. It’s also facing separate lawsuits by large groups of state attorneys general and further investigations in Europe.
Still, Google pulled no punches as it accused Microsoft, and also Oracle Corp., of creating “overly complex agreements” to try to lock enterprises into their cloud ecosystems. In its letter, Google said the companies are “limiting choice, increasing costs for customers, and disrupting growing and thriving digital ecosystems in the U.S. and around the world.”
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