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Microsoft finds itself at the center of a significant legal dispute in the UK, as competition lawyer Maria Luisa Stasi has filed a case alleging that the tech giant’s licensing practices unfairly inflate costs for businesses using rival cloud platforms like Amazon, Google, and Alibaba.

The legal claim, filed with the UK’s Competition Appeal Tribunal, could result in damages exceeding £1 billion ($1.27 billion) for affected British businesses.

At the heart of the case are allegations that Microsoft’s licensing terms for products such as Windows Server penalize companies opting for competitor cloud services. Stasi argues that the pricing structure deliberately steers customers toward Microsoft Azure, diminishing competition and consolidating Microsoft’s dominance in the cloud computing sector.

This lawsuit arrives against the backdrop of a broader investigation by the UK’s Competition and Markets Authority (CMA) into the cloud computing market, which scrutinizes major players including Amazon AWS, Microsoft Azure, and Google Cloud. The CMA’s findings, expected soon, could intensify pressure on Microsoft’s licensing strategies.

Microsoft’s licensing changes, introduced in 2020, have faced widespread criticism for incentivizing Azure over third-party platforms. CMA data reveals that these policies have significantly bolstered Microsoft’s customer base. Meanwhile, across the Atlantic, the US Federal Trade Commission has also launched an antitrust investigation into Microsoft’s cloud practices, echoing concerns raised in Europe and Ireland.

French provider OVHCloud and other European firms have criticized hyperscalers for bundling software with cloud services, limiting compatibility on competing platforms. Microsoft recently settled an antitrust complaint with the Cloud Infrastructure Service Providers in Europe (CISPE) for €20 million ($21 million) and has faced new accusations from Google of leveraging licensing terms to lock customers into its ecosystem.

The ongoing legal and regulatory scrutiny highlights growing concerns over shrinking competition in a rapidly expanding market. While the global cloud industry flourishes, smaller providers face challenges. Between 2017 and 2022, European providers’ market share fell from 27% to 13%, despite the market growing fivefold to €10.4 billion ($11 billion), according to Synergy Research Group.

As the CMA prepares to release its findings, the outcome of this case and regulatory investigations could reshape cloud computing policies and redefine the balance of competition in the industry.