Germany’s antitrust authority to look into complaint against Microsoft

German file hosting cloud service provider Nextcloud appeared to have won a major victory Monday, when the country’s antitrust authority announced it would be initiating what the company described as “the first steps towards an investigation into anti-competitive behavior by Microsoft, including the bundling of online storage service OneDrive in Windows.”

A release issued by the authority, known as Bundeskartellamt, indicated that for the next five years, Microsoft is subject to something called  “special abuse control,” which Nextcloud said is a designation that “can prohibit Microsoft from engaging in anti-competitive practices throughout Germany.’’

Frank Karlitschek, CEO and company founder, said, “over the past three years, Nextcloud has submitted extensive documentation and other evidence of anti-competitive behavior by Microsoft. The Federal Cartel Office (Bundeskartellamt) today determined that Microsoft has particular market power. This is an important step to prohibit future anti-competitive practices by the US company.”

In an interview on Monday, he said the decision gives his company a greater opportunity to win an antitrust suit and “definitely gives us encouragement, because if I have to be honest, over the past three years there were times where I  was not really sure if it was even worth it. But now it seems like it is moving  — it is at glacial speed, but it is moving. I also know the German and EU authorities are speaking with each other. This was confirmed to me, so I assume this seems to be part of some bigger initiative.”

Karlitschek added he did not think the “German antitrust authorities would do something in isolation.”

The initial complaint to the EU and German antitrust authorities, which was filed in November 2021 by a coalition of Nextcloud and 29 other European companies, involved Microsoft’s bundling of its OneDrive file-sharing app with both Windows 10 and 11. The group stated that it was nearly impossible to choose other file-sharing services.

In the complaint, the group, which called itself the Coalition for a Level Playing Field, accused Microsoft of  pushing OneDrive “wherever users deal with file storage and Teams is a default part of Windows 11. This makes it nearly impossible to compete with their SaaS services. In the wider context, you see that over the last years, Microsoft, Google, and Amazon have grown their market share to 66% of the total European market, with local providers contracting from 26% to 16%. Behavior like this is at the core of this growth of the tech giants and has to be stopped.”

The complaint went on to say, “the European Commission’s Directorate-General for Competition exists precisely for the purpose of preventing this kind of abusive behavior and keeping the market competitive and fair for all players.”

Another complaint, initially filed in 2019 and then revised in 2022, resulted in Microsoft reportedly agreeing to change its cloud computing practices in order to avoid an antitrust probe from the European Commission, the EU’s antitrust authority.

That filing was related to complaints made by European cloud companies, including Aruba, OVHcloud, Danish Cloud Community, and the Association of Cloud Infrastructure Service Providers (CISPE), about changes Microsoft had made to the terms of its outsourcing license agreement.

The cloud vendors had raised concerns after their customers were asked to pay more to run Microsoft software in non-Microsoft cloud environments, under what they saw as restrictive cloud licensing policies.

Microsoft reached agreements with both French cloud provider OVHcloud and CISPE in July.

The recent deals with OVHcloud and CISPE, said Phil Brunkard, executive counselor at Info-Tech Research Group, “seem like strategic moves to address antitrust issues in Europe. The OVHcloud agreement makes it easier to use Microsoft solutions on different cloud providers, showing a potential step towards more openness. The CISPE deal, which includes changes to software licensing and a hefty payment, aims to boost competition and avoid an EU investigation. However, even with these deals, Microsoft is still under the microscope, especially in Spain.”

These settlements, he said, “show just how much Microsoft has at stake in staying compliant and keeping its lead in the changing European market. Even as Microsoft softens its approach to antitrust challenges, it is clear they are still playing hard to maintain their market dominance.”

Karlitschek said of the two settlements that, moving forward, they represent a “good sign” and that he had been in contact with senior executives at OVHcloud, but the firm decided in the end just to “make a deal with Microsoft.” As for CISPE, he described them as an organization that is “fully funded by AWS so they are a proxy for Amazon.”