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Microsoft (MSFT) Azure Likely to Face Scrutiny in South Africa
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Microsoft (MSFT - Free Report) -owned Azure cloud business is expected to receive a formal complaint by the Competition Commission of South Africa, a government agency that regulates market competition, adding to the chorus of global regulators scrutinizing the U.S. tech giant's alleged market dominance and anti-competitive practices, according to Bloomberg.
The Competition Commission of South Africa is preparing to accuse Microsoft of imposing exorbitant fees for businesses seeking to migrate their cloud licenses to alternative vendors. This move, anticipated in the imminent future, may spark a legal showdown potentially culminating in fines of up to 10% of Microsoft's revenues in the African nation.
MSFT implemented software licensing changes globally two years ago, allowing South African customers to transfer their Microsoft software licenses to any local cloud provider at no additional cost.
As regulatory scrutiny on Big Tech mounts worldwide, the company finds itself in the crosshairs, facing allegations of anti-competitive behavior and market dominance not only in South Africa but across multiple jurisdictions. The outcome of these investigations could have significant implications for the tech industry's landscape and competition dynamics.
In recent years, South African regulators have taken actions against tech giants. Alphabet (GOOGL - Free Report) -owned Google was instructed to enhance visibility for smaller South African companies in search results and contribute to the training of smaller platforms.
Currently, officials are investigating whether AI models and digital platforms, including Microsoft's Bing, are impeding the revenue generation of the nation's news and media companies.
The scrutiny of Microsoft's Azure cloud extends beyond South Africa, with regulatory bodies worldwide homing in on potential anti-competitive practices.
MSFT recently announced that it will sell its chat and video app, Teams, separately from its Office product worldwide. This decision comes six months after the tech giant unbundled the two products in Europe, a move aimed at averting a potential European Commission (EU) antitrust fine.
The EU has been investigating the company's bundling of Office and Teams since 2020, following a complaint by Slack, a competing workspace messaging app owned by Salesforce (CRM - Free Report) , accusing MSFT of anti-competitive behavior by forcing Teams onto Office subscribers and obscuring its true cost.
Despite these measures, MSFT's unbundling may not fully shield it from further regulatory scrutiny. EU antitrust charges, potentially focusing on the level of fees and compatibility of rival messaging services with Office Web Applications, are expected in the coming months.
With a history of EU antitrust fines totaling approximately $2.37 billion over the past decade, Microsoft faces potential charges of up to 10% of its global annual turnover if found guilty of antitrust breaches.
In 2022, Cloud Infrastructure Services Providers in Europe (“CISPE”) lodged a complaint with the EU, which alleged that MSFT’s cloud computing licensing practices were detrimental to Europe’s cloud computing ecosystem. CISPE represents a consortium of 26 smaller EU cloud providers, along with major player Amazon (AMZN - Free Report) .
The EU is also reportedly worried about Microsoft's data collection practices and whether it complies with the privacy rules, such as the General Data Protection Regulation.
UK's competition regulator, Competition and Markets Authority has also initiated its own probe into the cloud market, particularly scrutinizing Microsoft's Azure terms for potential competition-limiting clauses.
Image: Bigstock
Microsoft (MSFT) Azure Likely to Face Scrutiny in South Africa
Microsoft (MSFT - Free Report) -owned Azure cloud business is expected to receive a formal complaint by the Competition Commission of South Africa, a government agency that regulates market competition, adding to the chorus of global regulators scrutinizing the U.S. tech giant's alleged market dominance and anti-competitive practices, according to Bloomberg.
The Competition Commission of South Africa is preparing to accuse Microsoft of imposing exorbitant fees for businesses seeking to migrate their cloud licenses to alternative vendors. This move, anticipated in the imminent future, may spark a legal showdown potentially culminating in fines of up to 10% of Microsoft's revenues in the African nation.
MSFT implemented software licensing changes globally two years ago, allowing South African customers to transfer their Microsoft software licenses to any local cloud provider at no additional cost.
As regulatory scrutiny on Big Tech mounts worldwide, the company finds itself in the crosshairs, facing allegations of anti-competitive behavior and market dominance not only in South Africa but across multiple jurisdictions. The outcome of these investigations could have significant implications for the tech industry's landscape and competition dynamics.
In recent years, South African regulators have taken actions against tech giants. Alphabet (GOOGL - Free Report) -owned Google was instructed to enhance visibility for smaller South African companies in search results and contribute to the training of smaller platforms.
Currently, officials are investigating whether AI models and digital platforms, including Microsoft's Bing, are impeding the revenue generation of the nation's news and media companies.
Microsoft Corporation Price and Consensus
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MSFT Faces Tough Scrutiny and Legal Woes
The scrutiny of Microsoft's Azure cloud extends beyond South Africa, with regulatory bodies worldwide homing in on potential anti-competitive practices.
MSFT recently announced that it will sell its chat and video app, Teams, separately from its Office product worldwide. This decision comes six months after the tech giant unbundled the two products in Europe, a move aimed at averting a potential European Commission (EU) antitrust fine.
The EU has been investigating the company's bundling of Office and Teams since 2020, following a complaint by Slack, a competing workspace messaging app owned by Salesforce (CRM - Free Report) , accusing MSFT of anti-competitive behavior by forcing Teams onto Office subscribers and obscuring its true cost.
Despite these measures, MSFT's unbundling may not fully shield it from further regulatory scrutiny. EU antitrust charges, potentially focusing on the level of fees and compatibility of rival messaging services with Office Web Applications, are expected in the coming months.
With a history of EU antitrust fines totaling approximately $2.37 billion over the past decade, Microsoft faces potential charges of up to 10% of its global annual turnover if found guilty of antitrust breaches.
In 2022, Cloud Infrastructure Services Providers in Europe (“CISPE”) lodged a complaint with the EU, which alleged that MSFT’s cloud computing licensing practices were detrimental to Europe’s cloud computing ecosystem. CISPE represents a consortium of 26 smaller EU cloud providers, along with major player Amazon (AMZN - Free Report) .
The EU is also reportedly worried about Microsoft's data collection practices and whether it complies with the privacy rules, such as the General Data Protection Regulation.
UK's competition regulator, Competition and Markets Authority has also initiated its own probe into the cloud market, particularly scrutinizing Microsoft's Azure terms for potential competition-limiting clauses.
Shares of this Zacks Rank #3 (Hold) company have gained 11.1% year to date compared with the Zacks Computer and Technology sector’s growth of 12.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.