Table of contents of the article:
After search engines, online advertising, and app stores, the cloud is now a hot topic. Market participants in hosting and online services for businesses are mobilizing to denounce practices deemed anti-competitive. Among them are the three American groups—Amazon, Microsoft, and Google—which hold 69% of the European market, according to Synergy Research Group. European companies have doubled their revenue in four years, but their market share has fallen from 21% to 16%.
"There is a competition problem in the cloud ," said MoDem MP Philippe Latombe. So far, attention has focused on consumer markets, but this issue is growing. The French Competition Authority has decided to examine this market: it will launch a public consultation " before the summer" and issue an "opinion" in early 2023, which will serve as a basis for future investigations. In the United States, a parliamentary report has already raised concerns about "techniques that lock out customers . " And in mid-March, Brussels made public a complaint for abuse of a dominant position filed against Microsoft by OVH, the French hosting leader . "We are examining it ," we confirmed to the European Commission.
What are the contested practices? "Microsoft is exploiting the strength 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 ," complains Thomas Fauré, CEO of Whaller, a French publisher of collaborative work software.
They are dumping in disguise
Another use deemed unfair is "free cloud credits" : "These offers have amounts and durations that prevent any competition, and users are ultimately locked in. It's covert dumping ," denounces Stéphanie Yon-Courtin, MEP (Renew). Amazon (33% of the global cloud market, according to Synergy) offers startups up to $100.000 (€95.566) in credits for its services for a year, plus software. In a report, the company is pleased to have thus distributed "hundreds of millions of euros" in Europe and to be a service provider for 75% of the forty largest French startups.
Microsoft (20% market share) has a similar program. Initially less generous, Google (10% market share) increased its credits in January to $200.000 over two years. Some startups would reach even higher in the United States, according to Business Insider. "We don't have that deep pockets. There's a distortion of competition ," laments Yann Lechelle, head of Scaleway (a subsidiary of Free, founded by Xavier Niel, an individual shareholder of Le Monde) . This software host and publisher currently offers startups up to €36.000, but "doesn't want" to increase it to €100.000, a figure that OVH aligned with at the end of 2020.
"Startups are very tempted by cloud credits ," explains Maya Noël, director general of the association of young digital businesses France Numérique. But there's a risk of dependency, as it's then difficult to switch providers. Digital France therefore advocates for " interoperability," which allows switching from one service provider to another. Amazon, Microsoft, and Google are also accused of building customer loyalty through egress fees , fees charged for transferring data to another host. In mid-2021, the American company Cloudflare accused Amazon of charging up to "80 times the actual transfer costs." Shortly thereafter, the latter increased the free data transfer allowance 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 oppose technology lock-in ," Google also states, claiming it "helps" customers move their data. Microsoft denies "locking in" the market, while qualifying itself: "Not all of the arguments in [OVH's] complaint are valid, but some are, and we will make changes to address them ," the company told the Financial Times.
The major cloud companies know they are in the sights of regulators. "These obligations will prevent them from unduly retaining customers, whether through legal or technical means ," we explain to the European Commission. The upcoming European law on digital markets will prohibit them from promoting their services and will promote interoperability. Brussels' proposal for the Data Act on industrial data aims to limit outgoing transfer costs, and then "eliminate" them , within three years. Despite this, French players remain mobilized and even dream of a Buy European Tech Act, which would reserve part of the public cloud and digital orders for Europeans.
