The tech giant’s carefully crafted image as best in class is starting to crack as antitrust complaints emerge.
Over the past decade, Microsoft has pulled off a remarkable transformation of its public image in Europe — from bad boy to the most Brussels-friendly of tech giants?
But that shine may now be coming off. In Brussels and across Europe, the Seattle-based giant faces a flurry of antitrust complaints about its cloud business as well as fresh claims that the company is not living up to its word on paying press publishers for their content.
A new onslaught is picking away at Microsoft's image in Europe as the "friendly one" among Big Tech companies — a position that was painstakingly cultivated under the leadership of Microsoft's veteran lawyer-president, Brad Smith, during the past seven years.
“Some companies have pretended for years to have cloaks of invisibility, but the spell has worn off. Abuse of market dominance is unfair and now that the abuse is slowly becoming visible, we as legislators will ensure that the cloaks no longer will work,” said Paul Tang, a left-wing Dutch member of the European Parliament.
Microsoft has tactfully managed to avoid the heavy antitrust fines of yesteryear — the last significant one being a €561 million slap on the wrist in 2013 for failing to follow previous competition orders, closing a 10-year period in which it had racked up €2.24 billion in EU antitrust penalties.
But practices are now emerging that hark back to the time when the company found itself in the EU's crosshairs, calling into question its straight-laced image.
“Microsoft also engages in many of the same practices in the few areas where it has an entrenched position — in particular, how it uses Windows’ dominant position in PC operating systems to leverage into other markets,” said Zach Meyers, a senior research fellow at the Centre for European Reform.
He was referring to the bundling of Microsoft's products and the promotion of its own services within its own systems — concerns that prompted office messenger service Slack to file a complaint to the European Commission in 2020, over concerns that the company had been illegally tying its Teams software, which competes with Slack's own, with its "market-dominant Office productivity suite." The Commission is still evaluating the complaint.
Antitrust woesAmong pro-regulation pushes, Microsoft supported the EU’s recently adopted Digital Markets Act, pitching a series of "principles" for its own app store intended to curry favor with EU regulators working on the new rules. Smith himself contracted meetings with the bloc's digital czar Margrethe Vestager, in which he highlighted his company's commitment to the EU crackdown on Big Tech giants.
But those stances are now being called into question amid a flurry of complaints, targeting one of Microsoft's largest and less-known businesses: cloud computing. In Q2 this year, the company’s commercial cloud revenues reached $22.1 billion.
The European Commission has started to ask cloud computing companies about Microsoft’s practices in their market following complaints filed last year by the likes of French cloud outfit OVH Cloud and German player NextCloud. The former had accused Microsoft of abusive licensing terms while the latter was concerned about the bundling of the company’s OneDrive products and services with the Windows operating system.
EU antitrust regulators circulated a questionnaire to Microsoft Azure partners and rival outfits in March, soliciting information on potentially abusive actions undertaken by the U.S. tech outfit regarding the licensing of its products.
For its part, CISPE, a cloud services association representing some of the players involved in the Microsoft complaints, said that smaller firms that rely on Microsoft’s cloud have been afraid to speak out.
“Fear of retaliation and dependency on its productivity software created a culture of omertà that prevented people from speaking out,” said Francisco Mingorance, secretary-general of CISPE.
Despite the Commission’s early-stage questioning of those involved in the sector, Vestager told Reuters recently that no obvious competition concerns had yet emerged in the space. Europe’s cloud ecosystem replied with a strongly-worded open letter.
Asked about the cloud complaints, Microsoft said that European firms have managed to build up their businesses off the back of the company’s efforts.
“The cloud market is growing and European cloud providers have built successful business models using Microsoft software and services,” a spokesperson said.
Falling through the cracksUntil recently, Microsoft had managed to craft a best-in-class image with policymakers.
“Microsoft has offered a more accommodating stance towards pro-competitive tech regulation than the other Big Tech companies — both in Brussels and elsewhere,” said Meyers, from the Centre for European Reform, in reference to the Digital Markets Act.
And indeed, Brad Smith was often quick to throw fellow tech giants, including Google and Apple, under the bus for their business practices — especially in sectors where Microsoft itself is weaker such as app stores and search. In June last year, Microsoft and Google ended their five-year cease-fire, leading to an escalating war of words between the two long-term rivals.
In both Brussels and Washington, Microsoft has largely escaped the most heated discussions on privacy and content moderation — including on copyright infringement and the fight against terrorist propaganda online — as policymakers focused their wrath and legislative energy on platforms such as Google, Facebook, and Twitter.
And as EU institutions craft new rules for how tech companies will need to deal with illegal content under the Digital Services Act, Microsoft’s networking platform LinkedIn is not under the spotlight.
In some areas such as cybersecurity and artificial intelligence, the tech giant is considered by government officials as a reliable partner. Microsoft was the only company invited among politicians, regulators, and academics to speak about AI and human rights from the business perspective this week at the Council of Europe’s inaugural meeting on a future treaty on AI, according to a program seen by POLITICO.
Capital painsMicrosoft has also played the role of investor and job creator in some European capitals. In 2020, Brad Smith announced plans to make Greece a regional hub for the cloud. In 2021, Microsoft said it would invest in Belgium.
And the tech giant still has good relations with Berlin and Paris, where a top French official described the company as “a teacher’s pet.”
However, in the context of the French presidential campaign, the cloud giant became a symbol of sorts for Europe’s reliance on foreign companies for digital infrastructure. When discussing tech issues, rivals to Emmanuel Macron have repeatedly name-checked the U.S. tech giant — in a bid to attack the government’s controversial decision to let the company host the Health Data Hub, a state project to bolster medical research.
On Wednesday, Philippe Latombe, an MP allied to Macron who’s been very vocal on sovereignty and cloud computing, wrote in an op-ed that the French ecosystem should join forces against Big Tech, including Microsoft, effectively putting the company in the same bag as Google, Facebook, Amazon, and Apple — a club that the software giant has long tried not to be associated with.
In January, France’s competition authority launched a cloud-computing sector inquiry. Scores of privacy regulators across Europe also started investigating the use of cloud services by the public sector.
Meanwhile, in Berlin, the stone in Microsoft’s shoe comes from an industry dear to the politicians’ hearts: Press publishers.
Last week, German collecting organization Corint Media, which represents more than 300 news organizations including RTL, Die Welt, and POLITICO owner Axel Springer, decided to take Microsoft to Germany’s Patent and Trademark Office’s arbitration board over copyright remuneration, after nearly two years of negotiations that the rights holders deemed unsuccessful.
The tech giant said it had “a history of supporting journalism and sharing revenue with publishers.” But Microsoft is paying for the high expectations created by a political alliance with the press industry, originally designed to take a shot at Google.
“Microsoft and Brad Smith said it was important for the well-being of the press that it is well remunerated and fairly paid-for content but they never made us an acceptable offer,” said Oliver Schmidt, head of the content strategy at Corint Media.
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