A heated battle over cloud competition is unfolding in the UK, with Microsoft aggressively defending its licensing policies against complaints from rivals AWS and Google. The dispute centers on Microsoft’s software pricing for non-Azure cloud providers, a practice the UK’s Competition and Markets Authority (CMA) flagged as potentially harming competition.

In a bold response, Microsoft dismissed the claims as an “extraordinary and unprecedented” attempt by its biggest cloud rivals to force regulatory intervention on pricing. According to Microsoft, AWS and Google want the CMA to cap the fees they pay to run Microsoft software on their clouds, a move Redmond argues would undermine its intellectual property rights and set an industry-wide precedent.

Microsoft’s software licensing model charges AWS and Google customers significantly more to run products like Windows Server outside of Azure, with prices reportedly up to four times higher. Google has labeled this a “software tax,” claiming it unfairly penalizes customers who choose alternatives to Azure. AWS-backed research suggests European businesses are being overcharged by billions due to Microsoft’s licensing policies.

The CMA’s initial findings confirmed concerns that Microsoft’s pricing approach unfairly disadvantages Azure, making competition less fair. The regulator is currently thinking about taking action, maybe against Microsoft’s licensing policies as well as more general market obstacles like egress costs and the dominance of a small number of powerful cloud providers.

Yet, Microsoft maintains that it is only a competitor in the industry, citing the fact that AWS is still the leading cloud provider in the UK, holding a dominating 50% of the £9 billion cloud market in 2023. Google trails well behind Microsoft, which has a 30–40% share.

The company also accused Google of funding lobbying efforts through industry groups to influence regulators, claiming that its competitors are strategically positioning themselves as victims while benefiting from their own closed ecosystems. Microsoft questioned whether AWS or Google license their proprietary software to competitors at all, arguing that their complaints lack merit.

The CMA’s discussions on potential regulatory measures might have an impact on the UK’s cloud ecosystem. Even though more significant adjustments might create new rules to improve competition and lessen market concentration, a decision against Microsoft might force it to reevaluate its pricing policies. Regulators expect to make a final decision in the battle for cloud dominance later this year, keeping the outcome uncertain.