France Steps into the Spotlight on Unfair Software Licensing

Jul 3, 2023 | News

The Ten Principles for Fair Software Licensing were born in France, and last week returned to centre stage there. Created in cooperation between CISPE and Cigref, the French organisation of digital leaders, and launched under the patronage of former Digital Minister Cedric O in 2021, the Principles called out the many ways in which dominant software companies could leverage the power of ‘must have’ productivity software to influence customers’ choice of cloud.

Last week, both the French Senate and the Autorité de la Concurrence, France’s competition authority, voiced serious concern over the anti-competitive potential of unfair software licensing practices as organisations move to the cloud.

Already christened ‘The Microsoft Amendment,’ the proposed addition to the draft law to “Sécuriser et réguler l’espace numérique” is a powerful recognition that a single legacy software company is able to restrict the choice of customers as they move to the cloud. Microsoft’s unfair software licensing practices lock-in customers, increase costs and penalise other cloud service providers. Whilst we’d like to see more precise and stringent language to ensure that these anti-competitive behaviours are fully captured, the Senate Special Committee should be congratulated for identifying and calling out these harms.

For its part, the Autorité de la Concurrence has also reached important conclusions on the potential for large legacy software companies to unfairly distort the cloud infrastructure sector. In its report into the cloud market released yesterday, the Autorité says;

“The investigation uncovered practices likely to reinforce the disincentives for a customer to use another cloud provider, such as restrictive contractual clauses, tied sales, pricing advantages favouring their products, and technical restrictions.” (see Summary of the report here)

The detail of the report goes even further, not only directly referencing CISPE’s and others’ complaints on unfair software licensing practices to the European Commission, but also the detailed evidence of harm presented in the Professor Jenny Study (see pages 142-145).

It concludes that:

“[…] by leverage effect, a publisher in a dominant position on a software could oust some of the competition to win customers on cloud services.” (Para. 532)

More and more national competition regulators are coming to the same conclusion that unfair software licensing practices are a significant factor in the distortion of competition as organisations look to move to the cloud. The UK’s Ofcom report has also suggested a potential investigation by the Competition and Markets Authority (CMA), and in the USA the Federal Trade Commission (FTC) has heard evidence from Professor Jenny and continues to weigh comments from many stakeholders whilst investigating this issue in America.

Microsoft is desperate to avoid this scrutiny. Its charm offensive in national capitals and in Brussels insists that changes have been made and that its licenses no-longer lock in customers nor discriminate against competitors, and it continues to suggest that European partners are adopting its new reseller programmes. Yet, we know from our members that not only do they feel they have any choice but to participate in Microsoft’s schemes, but that the changes presented only increase Microsoft’s access to their customers. Microsoft has not addressed discriminatory pricing or terms that disadvantage independent cloud infrastructure service providers. Nor is it likely to do so without formal investigations and regulatory obligation.

Despite these gagging orders enforced as part of private deals with European players, we find it encouraging to see that national authorities continue to find evidence of ongoing harm and show willingness to act to defend free and fair competition in this sector.

France should be applauded for its leadership in this crucial area.

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