Google tried to offer $512 mn package to derail Microsoft antitrust pact

By Samuel Stolton

Google offered a group of European Union-based cloud firms a package worth about €470 million ($512 million) in a failed attempt to derail their antitrust settlement with Microsoft Corp. that freed the US software giant from a potentially costly EU case.
 

Cloud Infrastructure Services Providers in Europe, or CISPE, last week ditched a complaint at the EU’s antitrust arm over Microsoft’s software licensing processes after brokering a deal to get fairer access to the US firm’s technologies. CISPE had previously argued Microsoft made it too difficult for customers to change cloud providers by tying its business software to its Azure cloud services. 

 

But just days before the agreement was announced, Alphabet Inc. unit Google made a counteroffer designed to convince CISPE to maintain their EU complaint, according to confidential documents seen by Bloomberg and people familiar with the matter, who spoke on condition of anonymity.

The package totaled approximately €455 million worth of software licenses for Google’s cloud technology over 5 years as well as €14 million in cash, as part of a long-term partnership proposal with the Mountain View, California-headquartered firm, according to the documents. 

Google’s offer was conditional on CISPE maintaining its EU antitrust complaint into Microsoft’s allegedly abusive activities, and was also boosted by about €6 million in financial contributions from Amazon Web Services, as part of its ongoing partnership with the association, the people said.

But the offer didn’t sway CISPE’s membership, which includes a swathe of European firms. Instead, they opted to take up an offer allowing them to use enhanced Microsoft Azure features — with service providers permitted to offer Microsoft applications and services on their local cloud infrastructures. People familiar with the agreement said that Microsoft’s offer also comes with a financial contribution of €10 million.

“AWS is a founding member of CISPE and has regularly made voluntary contributions to CISPE,” AWS said. “Enterprises across every major industry have long supported trade associations in similar ways.”

While Google has long trailed Amazon.com Inc. and Microsoft in the cloud market, it’s begun to see impressive results. After breaking even for the first time last year, Google’s cloud operation posted first-quarter profit of $900 million — well ahead of analysts’ projections of $672.4 million. Google’s cloud unit is viewed as one of the firm’s best bets for growth as its core search advertising business matures. 

Its performance could be further boosted by increasing regulatory scrutiny into Microsoft’s activities. EU probes can lead to fines as high as 10 per cent of global sales if regulators find proof of competition abuses — increasing the incentive on firms to settle with complainants.

A Google spokesperson said that it has long supported the principles of fair software licensing and that the firm was having discussions about joining CISPE, to fight anticompetitive licensing practices. Amazon didn’t immediately respond to Bloomberg’s request for comment. 

A CISPE spokesperson said the association’s members were presented with alternative options to accepting the Microsoft deal, but they refused to confirm any of the terms of the deal. 

Microsoft pointed toward an earlier statement from its President Brad Smith, in which he said the company was pleased to have resolved EU antitrust concerns. 

Microsoft has a history of sidestepping antitrust scrutiny by brokering deals with complainants. In 2004, it handed over $9.75 million to a Google-backed group — the Computer and Communications Industry Association, in order for it to drop a complaint into Microsoft’s practices before EU regulators.