US cloud giants accused of distorting competition - 🏆 Managed Server
July 26 2022

US cloud giants accused of distorting competition

Data hosting and online service actors denounce practices deemed unfair by market leaders Amazon, Microsoft and Google.

After search engines, online advertising or app stores, the cloud. The players in the hosting and online business services market are mobilizing for denounce practices deemed anti-competitive. In line of sight, the three American groups Amazon, Microsoft and Google, which hold 69% of the market in Europe, according to the company Synergy Research Group. European companies have doubled their turnover in four years but their market share has dropped from 21% to 16%.

“There is a competition problem in the cloud “Said MoDem deputy Philippe Latombe. So far the focus has been on consumer markets, but this theme is on the rise. The French Competition Authority has decided to examine this market: it will launch a public consultation before summer " and will release a "opinion" in early 2023, which will serve as the basis for future investigations. In the United States, a parliamentary report has already been alarmed by "Techniques that block customers"And Brussels made public, in mid-March, a complaint for abuse of dominant position filed against Microsoft by Ovh, the French leader in hosting"We are examining it", we confirm to the European Commission.

What are the disputed practices? “Microsoft is leveraging the strong position of its Office 365 office software suite “, Said Michel Paulin, CEO of OVH. If we want to sell it to our customers, Microsoft offers us a more expensive and technically more restrictive license than the one granted to players who sell its cloud services in parallel. “It's a form of tied sales “, Denounces Thomas Fauré, CEO of Whaller, a French publisher of software for collaborative work.

They are dumping in disguise

Another use deemed unfair, "Free cloud credits"“These offers have amounts and durations that prevent any competition and users are ultimately bound. It's disguised dumping ", reports Stéphanie Yon-Courtin, MEP (Renew). Amazon (33% of the global cloud market, according to Synergy) offers start-ups up to $ 100.000 (€ 95.566) in credits on their services for one year, plus software. In a report, the company is pleased to have so distributed "Hundreds of millions of euros" in Europe and to be a service provider for 75% of the forty largest French start-ups.

Microsoft (20% market share) has a similar program. Initially less generous, Google (10% of the market) increased its credits in January to $ 200.000 in two years. Some startups would reach even more in the United States, according to the Business Insider site. “We don't have such deep pockets. There is a distortion of competition ", complains Yann Lechelle, head of Scaleway (subsidiary of Free, founded by Xavier Niel, individual shareholder of The world). This host and software publisher now offers start-ups up to 36.000 euros, but "does not want" rise up to 100.000 euros, a figure on which OVH aligned itself, at the end of 2020.

"Start-ups are very tempted by cloud credits", explains Maya Noël, director general of the association of young digital companies France Numérique. But there is the risk of addiction, because then it is difficult to change supplier. Digital France therefore invokes l ' " interoperability ", which allows you to switch from one service provider to another. Amazon, Microsoft or Google are also accused of building customer loyalty thanks to the rates in take the exit (uscita), these fees charged for transferring data to another host. In mid-2021, American Cloudflare accused Amazon of charging up to “80 times the actual transfer costs”.Shortly thereafter, the latter increased free transferable data from 1 to 100 gigabytes.

The word dumping comes from the English "dump" which literally means "to download". It is a practice whereby large companies introduce products to the European market at a much lower price than the market price. This artificial price is due to the presence of state subsidies to companies in the country of origin, or to the overproduction of a particular product by companies that sell such surplus goods abroad.

Why is dumping a bad thing?

 Dumping is a form of unfair competition as products are sold at a price that does not accurately reflect the cost of production. It is very difficult for European companies to remain competitive under these conditions and in the worst cases they are forced to close down and lay off workers.

In the sights of lawmakers

Under pressure, Amazon defends itself: “Customers continue to use our cloud services for value, not technical constraints or costs. " We are against the technological blockade “, Also states Google, which states that "it helps" customers to move their data. Microsoft denies to "block" the market, as it qualifies: “Not all the arguments in the complaint [of OVH] they are valid, but some are, and we will make changes to address them “, The company affirmed al Financial Times.

Large cloud companies know they are being targeted by lawmakers. "The obligations will prevent them from detaining customers unduly, by legal or technical means", we explain to the European Commission. The future European law on digital markets will prohibit them from promoting their services and will promote interoperability. The Brussels proposal for the Data Act on industrial data plans to limit the costs of outbound transfer, therefore of "Delete them", within three years. Despite this, the French players remain mobilized and also dream of a Buy European Tech Act, which would reserve part of the public cloud and digital orders for Europeans.

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