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Microsoft's (MSFT) Cloud Services Face Antitrust Complaint

Zacks Equity Research
·3-min read

Microsoft’s MSFT cloud computing practices have recently received allegations of anticompetitive behaviour by Cloud Infrastructure Service Providers in Europe, a trade group that includes Amazon AMZN among its members.

They took their grievance to the European Union antitrust regulators, alleging that Microsoft is leveraging its dominance in productivity software by using unfair licensing practices to lure customers in Europe to its Azure cloud service, thus making it difficult for them to switch to other cloud service providers.

It alleged that Microsoft's anti-competitive practices included discriminatory bundling and tying of its products, self-preference pricing and locking in customers both on the technical and competitive levels. This is causing a disadvantage to its European rivals and is damaging the European cloud computing ecosystem.

Along with Amazon, which is currently the leader in cloud computing services, this complaint has also been supported by French cloud provider OVHcloud and Italy-based Aruba SpA.

Microsoft Faces Tough Scrutiny and Legal Woes

The antitrust allegations, however, don’t come as a surprise to Microsoft, as it has been facing numerous legal complaints in recent years.

German cloud-storage company Nextcloud has shown concerns about Microsoft’s practice of linking products together. Last year, it filed a complaint with the EU about Microsoft’s practice of bundling its OneDrive storage product with the Windows operating system.

The business-messaging app Slack also accused Microsoft in 2020 of trying to suppress competition by tying its Teams platform for business communication with its Office productivity software.

Microsoft Corporation Price and Consensus

Microsoft Corporation Price and Consensus
Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

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Besides this, one of the biggest probes Microsoft is facing in the United Kingdom is its deal to acquire the gaming company, Activision Blizzard ATVI.

The acquisition is facing an in-depth probe in the United Kingdom, which has entered the second phase of review with the Competition and Markets Authority, as they believe that this acquisition could hurt competition in gaming consoles, subscription services and cloud gaming if Microsoft refuses to give competitors access to Activision's best-selling games.

This acquisition got Microsoft in a tussle with Sony SONY, which also offers cloud gaming through its PlayStation Plus subscription. The company raised concerns that the acquisition could influence people to switch from PlayStation to Xbox. Activision’s most popular game, the Call of Duty series, has been the best-selling game in its genre, and losing that to Microsoft could take away huge business from Sony.

However, in response, Microsoft has promised to keep Call of Duty on the PlayStation for at least several more years beyond its current contract with Sony. It is also contemplating making it available on the Nintendo Switch console, where the game isn't currently available.

This Zacks Rank #4 (Sell) company has also shown its will to cooperate with the European Commission as and when required to address their concerns.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On the brighter side, Microsoft achieved approval from Brazil’s competition authority as they stated that they operate in a highly dynamic and competitive industry and that the merger will not harm competition in any way.

Saudi Arabia has also signed off on the deal, but it still awaits important decisions from the U.S. Federal Trade Commission and authorities in the U.K. and the EU.

Microsoft might face possible conditions imposed on the gaming deal by regulators, which compel them to keep access open to Call of Duty for longer and ensure that its rivals aren't getting a lesser version. Despite this, if the acquisition is successfully closed, it will be the largest in the history of the tech industry.


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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
Sony Corporation (SONY) : Free Stock Analysis Report
 
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