Microsoft’s “harmful” cloud licensing practices need to be swiftly and directly remediated by the Competition and Markets Authority (CMA) to prevent irreparable harm being done to the UK cloud services market, a university law professor has warned.
In a 36-page academic paper, Peter Whelan, a law professor at the University of Leeds, warns the UK competition watchdog that it risks missing an opportunity to quickly draw a close to Microsoft’s controversial cloud licensing practices if its provisional recommendations about how to address the matter are pursued.
These recommendations, originally published in January 2025, said the CMA is considering taking a “targeted approach” to addressing the anti-competitive issues brought to light by its investigation regarding Amazon Web Services (AWS) and Microsoft’s behaviour in the UK cloud market.
Singling out the former, Microsoft has come under fire by the CMA for its decision to charge customers more for running its software in cloud environments hosted by its competitors.
In its January 2025 report, the CMA said this practice “exacerbates the harm we have provisionally found arising from high market concentration and barriers to entry and expansion in relation to Microsoft’s significant unilateral market power.”
To remedy the situation, the report suggested the CMA board should use powers conferred on it through the roll-out of the Digital Markets, Competition and Consumers Act 2024 (DMCCA) on 1 January 2025 to mark Microsoft out as a supplier with strategic market status (SMS).
This would mean the CMA could impose legally binding conduct requirements or pro-competition interventions on both firms to limit and remedy the toll their activities have allegedly had on the market.
Long wait
However, Whelan’s paper suggests it could take up to nine months or more to confer SMS on Microsoft, and at least 18 months for any remedy imposed under DMCCA to take effect.
“Given the complexities involved in these novel legal processes, as well as the potential for drawn out implementation or trialing phases, it is very possible indeed that any remedy imposed under the DMCCA regime will only start to take effect more than a year and a half after the publication of the CMA’s final decision in its market investigation,” he wrote.
“The timescale would be even longer if, due to capacity constraints, for example, the CMA board did not initiate an SMS designation against Microsoft immediately following the publication of the Final decision report in the cloud services market investigation.”
For this reason, Whelen goes on to advise the CMA to consider taking swifter and more direct action against Microsoft and its licensing techniques.
“It is axiomatic that a swift enforcement response to conduct that is harming competition can be vital for the effectiveness of a competition remedy, and particularly so with respect to digital markets.”
Citing an article from the European competition journal, entitled Strengthening effective antitrust enforcement in digital platform markets (2022), Whelan added: “In such fast-moving markets, ‘timely intervention is of the essence in preventing irreparable harm to competition’.”
The paper’s publication comes about a month before the CMA is expected to publish the final decision in its investigation into how well competition works in the UK cloud infrastructure services market, which began in October 2023.
The investigation itself was prompted by the outcome of a 12-month investigation by communications regulator Ofcom to assess how competitive the UK cloud market is – and establish who its major players are.
Partway through that investigation, which began in September 2022, Ofcom singled out the behaviour of AWS and Microsoft as being particularly problematic from a competition standpoint. And this, in turn, resulted in Ofcom referring the market over to the CMA for further investigation.
The CMA is far from the only regulator or party to have taken issue with Microsoft’s cloud licensing practices, as its cloud rival, Google, filed a complaint with the European Commission over its activities on this matter in September 2024.
Computer Weekly also reported last month that its habit of charging customers more for running its software in competitors’ cloud is the subject of a £2bn legal claim that has been filed with the UK Competition Appeal Tribunal.
Ryan Triplette, executive director of the Coalition for Fair Software Licensing, said his organisation supports the contents of Whelan’s paper, having also been another of the parties to have previously spoken out about Microsoft’s cloud licensing arrangements.
“The UK Competition and Markets Authority has made it clear that Microsoft uses its ‘significant market position’ in software products and services to restrict cloud choice, the impact of which is ultimately borne by the consumer – in higher costs, security vulnerabilities and taxpayer waste,” he said. “We urge the CMA ahead of its final decision to protect customers by taking strong, direct action against Microsoft to end its harmful software licensing practices.”
