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Microsoft was hit with a class action on Tuesday, totaling more than £1 billion ($1.3 billion), filed on behalf of thousands of U.K. businesses. The lawsuit claims that Microsoft overcharged for licensing fees related to its Windows Server, a key software used in cloud computing.

The legal action, filed at the Competition Appeal Tribunal (CAT), alleges that businesses using third-party platforms, such as Amazon, Google, and Alibaba, were charged higher licensing fees for Windows Server compared to customers using Microsoft’s own Azure cloud service.

Allegations of Anti-Competitive Practices

Maria Luisa Stasi, a regulatory expert and competition lawyer at Article 19, filed the claim on behalf of U.K. businesses. She argued that Microsoft is unfairly punishing companies for using services like Google, Amazon, and Alibaba by imposing higher fees. Stasi stated that Microsoft’s pricing strategy effectively forces customers into using its own cloud platform, Azure, thereby restricting competition in the sector.

"Microsoft is trying to force customers into using its cloud computing service Azure and restricting competition in the sector," Stasi said. "This action reflects an abuse of its dominant market position."

Background and Legal Proceedings

The class action is part of a broader legal challenge against Microsoft, mirroring similar proceedings initiated by Alexander Wolfson, a former barrister, who has been working on behalf of U.K. organizations that purchased Microsoft licenses. His earlier multibillion-pound collective proceedings aim to hold Microsoft accountable for its licensing practices.

Stasi’s opt-out collective action is available to all U.K. businesses that purchased Windows Server licenses through Amazon Web Services (AWS), Google Cloud Platform, and Alibaba Cloud. The case centers on allegations that Microsoft uses its dominant position in the market to manipulate pricing in favor of Azure.

Concerns About Microsoft's Market Power

The U.K.'s Competition and Markets Authority (CMA) has previously raised concerns about Microsoft's dominance in the cloud computing space. In September 2023, the CMA reported that Microsoft holds a market share of 70 to 80% in desktop operating systems, making it one of the most influential players in the software industry.

The claim further alleges that Microsoft is exploiting its position to overcharge U.K. businesses, knowing they rely heavily on its software. Stasi argues that the higher fees are a deliberate strategy to push customers away from rival platforms in favor of Azure, making it harder for other cloud providers to compete.

Previous Criticism of Microsoft's Licensing Practices

This class action comes amidst growing scrutiny over Microsoft’s licensing practices. In 2023, Ofcom, the U.K. telecommunications regulator, called for a review of the cloud services market, citing issues that prevent customers from easily switching between providers. In the same year, both Google and Amazon urged the CMA to investigate Microsoft’s practices, claiming they stifle competition.

Microsoft is also embroiled in a separate legal dispute with software reseller ValueLicensing, which is suing the company for £270 million over allegations that it has hindered the supply of pre-owned software licenses in the U.K. and the European Economic Area.

Next Steps in the Case

Stasi is represented by Scott+Scott UK, a law firm specializing in class action lawsuits. At the time of the report, Microsoft had not responded to requests for comment regarding the class action.

The case is expected to be closely watched by both industry observers and regulators, as it could set a precedent for future antitrust actions in the tech and cloud services industries.