Introduction

The antitrust issues arising out of the digital markets are a concern for the regulators around the world. Over the period, we have seen regulators scrutinizing the conduct of the tech giants for abuse of dominant position and imposing anti-competitive conditions, rarely do we see one tech giant making allegations against another tech giant. Yet the recent news wherein in the United States of America (US), Google has alleged Microsoft of contravening the antitrust laws in its Cloud Services marketplace. This is not the first time Google has alleged Microsoft of violating competition laws. Earlier, the search-giant had filed similar information before the European Commission (EC). Further, the Federal Trade Commission (FTC) and Competition Markets Authority (CMA) are also looking into the allegations raised by Google and the report is likely to be submitted by April 2025. In the background of these developments, the author will delve deeper into the allegations from an Indian perspective. The author will discuss as to why these allegations raised against Microsoft fall to be examined by the Competition Commission of India (CCI) under the Competition Act, 2002. This article is divided into three parts. The first part will delve into the allegations raised by Google against Microsoft; the second part will analyze the concept of abuse of dominance under the Competition Act and finally, the third part will give a brief analysis of these allegations under the law.

Allegations raised

Microsoft is currently facing investigations in the EU, US, and UK for its cloud services. In the United States, Google has accused Microsoft of employing unfair licensing terms to maintain dominance in the cloud computing market. Specifically, Google claims that Microsoft “locks in clients” by making it difficult for businesses to utilize anything other than its Azure cloud infrastructure offering. This is due to Microsoft's strong presence in Windows Server and Office products. The complex web of licensing regulations imposed by Microsoft prevents businesses from diversifying their enterprise software vendors. Similar concerns have been raised by Google in the UK, taking a strong stance against Microsoft, claiming that their cloud services business methods create an unfair disadvantage for competitors. Google has accused Microsoft of abusing its dominant power by leveraging its position in operating systems to gain an advantage in the cloud storage platform. Google pointed out that the challenge with Microsoft lies in their licensing policies, which hinder other companies from competing, without any underlying technological issues. Google further argues that this behavior not only directly harms customers but also acts as a barrier to fair competition. Further in the past, unlike in the US and the UK, Google was not the first to file information; the small cloud service providers had also complained to the European Commission about Microsoft's cloud practices and licensing deals, which allegedly favored its Azure cloud infrastructure. These changes have raised concerns about unfair competition in the cloud storage market. These allegations suggest that Microsoft's licensing practices make it more difficult for businesses to choose alternative cloud storage providers, effectively pushing them towards Azure. This behavior could limit competition and hinder the development of a diverse and innovative cloud storage market within the EU. The European Commission, which is the executive branch of the European Union, has initiated an investigation into these claims of unfair competition in the cloud services market. They are examining whether Microsoft's licensing practices hinder competition and limit customer choice.

Abuse of Dominance and Competition Act, 2002

The allegations raised in the above-mentioned jurisdiction were of abuse of dominant position by self-preferencing of the cloud services with Microsoft’s Office software. The self-preferencing by a dominant entity has the potential of creating “lock-in effects” for the consumers depriving them of the wider choice options vis-à-vis creating entry barriers for the new competitors to enter into the market. In India, under the Competition Act, 2002 (the Act), allegations pertaining to self-preferencing by a dominant entity are covered under Section 4 of the Act. Section 4(2)(e) clearly demonstrates that if an enterprise uses its dominant position in one relevant market to enter or protect another relevant market, then it can be viewed as an abuse of dominance. Furthermore, section 4(2)(c) views denial of market to its competitors in “any manner” as an abuse of dominant position.

However, to bring any allegation under Section 4, it is important to first prove the dominance of the alleged enterprise. The dominant position of the enterprise is inquired by giving due regard to all or any of the factors as embraced under sub-section 4 of Section 19 of the Act. Also, the dominance is proved only after the “relevant market” is delineated, the delineation of the relevant market allows competition authorities to assess the market power of the firm under scrutiny. Market power is a key element in abuse of dominance cases, as it reflects the ability of a firm to act independently of competitive pressures. This helps in assessing whether the firm has the ability to control prices, exclude competitors, or act independently of market forces.

Do the Allegations Raised Against Microsoft in other jurisdictions Make a Case in India for the CCI to Investigate?

Having discussed the framework let us now examine the prima-facie abuse of dominance by Microsoft in its cloud market. One of the departures made by the Competition Act, 2002 from erstwhile MRTP Act, 1969 was that being dominant is no longer considered bad. Only the abuse of such dominance is.

The first step for investigating any allegations under Section 4 is the delineation of the relevant market, the relevant market consists of the relevant product market (RPM) and relevant geographic market (RGM). The RGM in this case may be India as the cloud computing landscape may be different. The accusation against Microsoft revolves around its cloud services, specifically the integration with its office suite product. To evaluate this, we must identify products that could replace Microsoft's cloud services while still working seamlessly with its office suite. The allegations suggest that Microsoft is limiting access for new cloud service providers. RPM highlights the interchangeability of products based on characteristics, prices, and intended use. In this context, the potential RPM is the "Market for cloud services." Consequently, the applicable RM may be "market for cloud services in India."

Dominance analysis of Microsoft: As of July 2023, Microsoft's Windows holds a 70% global desktop OS market share, indicating dominance in the OS market. Furthermore, Microsoft has an 85% market share in the office suite market, showcasing dominance in business software.

Has Microsoft Abused its Dominant Position Under Section 4(2)(e)?

The fair play field of competition, which is the cornerstone of competition law, may be adversely affected as Microsoft’s conduct is questionable. If Microsoft is using its dominance to favor its products or services, it disrupts fair competition and establishes an unequal platform, where competitors struggle to compete. This not only harms the current competitive landscape but also has long-term implications for market dynamics and consumer welfare. Section 4(2)(e) of Indian competition law, akin to its global counterparts, prohibits the abuse of dominant positions through leveraging, emphasizing the need to maintain fair competition and protect the market from practices that harm consumer choice and innovation. By leveraging its dominant position, Microsoft may be limiting the entry of alternative office software providers and restricting consumer choice. This can result in a monopolistic environment where competition deteriorates, hindering innovation and impeding the growth of smaller players.

In the case of Google v CCI, it was observed by the National Company Law Appellate Tribunal that Google has leveraged its dominant position in Play Store to protect its dominant position in online general search in contravention of Section 4(2)(e) of the Act and the criteria for determining abuse was summed as when a dominant company leverages its dominance in one market to benefit from any secondary market. Further, in the Microsoft Media Player antitrust case, Microsoft faced accusations of tying its media player with its OS. In consequence of that a substantial fine of $613M was imposed.

Observations from these cases serve as crucial lessons, highlighting the necessity of regulatory intervention to preserve a competitive marketplace. The problem of leveraging wouldn’t be there if Microsoft had allowed customers the option to choose from other cloud storage providers and would not unfairly limit or avoid using competing offerings. But here Microsoft offers only OneDrive for cloud storage on its platform without supplying users with a meaningful preference, which raises concerns about anti-competitive behavior.

Conclusions and Way Forward

If action taken against Microsoft by the regulatory bodies inside the US, UK, and EU is based on substantiated allegations, it suggests a capacity sample of anticompetitive conduct. India, as a growing market for technology, should take into account the steps to ensure fair competition and protect the cloud computing industry. While some antitrust scholars argue that these commissions should have a lenient approach toward the digital market, it has also been found having a lenient approach towards it is going to raise concerns for the market in the future as explained in the business journey of Amazon. Hence, it is the need of the hour, especially in the case of the digital markets, to regulate the digital markets at the nascent stage as it emerges that some kind of antitrust concerns arise from the activities of the enterprise.

[Kalyani is a II year B.A.LL.B. (Hons.) student at the Rajiv Gandhi National University of Law in Punjab]