UK Lawsuit Challenges Microsoft's Software Licensing Practices and Market Dominance

In the latest chapter of Microsoft's ongoing legal and regulatory saga, the software giant now faces a multibillion-pound lawsuit in the United Kingdom, with claims that could reshape the market for software licenses across Europe. This case, led by the law firm Stewarts, directly targets Microsoft's practices surrounding Windows and Office licenses sold since October 2015. At its heart, the complaint accuses Microsoft of unfairly restricting competition between new and pre-owned licenses, systematically inflating costs for individuals, businesses, and public sector organizations alike.

Background: A Long History of Regulatory Scrutiny​

Microsoft's dominance in desktop software is nothing new. For decades, Windows and Office have been essential tools for users across the globe. But with that market leadership has come persistent allegations of anticompetitive conduct—a trend seen from the US to the EU, and now, through this fresh UK class action.
In the 1990s and 2000s, antitrust cases forced Microsoft to decouple Internet Explorer from Windows and later, to provide European customers with alternative browser options in an effort to break perceived monopolies in the software space. The core issues then, as now, revolved around how Microsoft leveraged its power: bundling products, setting restrictive licensing paths, and tightening its grip on ecosystems in subtle yet formidable ways.

The Core Allegations: Restrictive Licensing and Price Inflation​

The current UK lawsuit asserts that since October 2015, Microsoft abused its market position to limit competition in two vital areas:

• Restricting the resale of pre-owned software licenses: Under European law (as clarified in the 2012 UsedSoft decision by the European Court of Justice), the resale of “used” software licenses is legal, provided the original purchaser removes their installation. Critics now allege that Microsoft’s actions—both in license terms and technical enforcement—have made such resales unworkable. Key claims include accounts-tying, device-locking, and the refusal to transfer perpetual licenses, thereby nullifying a legitimate secondary market.
• Overcharging for Windows and Office: The suit further alleges that Microsoft’s tactics, from differential regional pricing to enforced upgrades, systematically raised the price paid by UK customers. Consumers and businesses are said to have borne the brunt, often lacking alternative options due to the company's overwhelming presence in the productivity software space.

Kate Pollock from Stewarts, leading the charge, summarized the plaintiff’s perspective: “[Microsoft’s] conduct has had a profound and costly impact on millions… This claim seeks to hold Microsoft to account and to secure compensation for the many affected members of the class.” Proposed class representative Alex Wolfson echoed these sentiments, emphasizing the sheer scale—potentially billions of pounds—and significance for market fairness.

Context: Microsoft’s Cloud Era Licensing Battles​

This class action comes on the heels of broader regulatory attention toward Microsoft’s cloud and software licensing practices, both in the UK and across Europe. In 2022, the Cloud Infrastructure Services Providers in Europe (CISPE) filed an antitrust complaint, arguing that Microsoft's licensing made it disproportionately expensive to run Microsoft software—including Windows Server—on non-Azure platforms. Public and private sector organizations collectively faced an estimated €1 billion per year in additional licensing costs, according to CISPE.
The complaint detailed that running Windows Server or Office on third-party clouds could cost five times more than on Azure, with further complications from contractually enforced audits and technical limitations impeding migration to rival services. While the CISPE matter was settled in 2023—reportedly for €30 million and with Microsoft agreeing to suspend licensing audits and enhance its Azure Stack HCI for the European market—the broader picture remains fraught with controversy and skepticism within the industry.
Small cloud providers, alongside AWS (a CISPE founding member), have been particularly vocal, cautioning that such settlements risk entrenching Microsoft’s influence rather than fostering true competition.

Microsoft’s Defense and Industry Dynamics​

For its part, Microsoft continues to defend its software licensing models and pricing as industry standard—characterizing regulatory scrutiny as overly narrow and out of sync with the fast-moving world of technology. In recent responses to both UK and EU regulators, Microsoft has argued:

• Innovation Outpaces Regulation: The company claims that the focus on licensing fails to appreciate the rapidly evolving dynamics of the tech marketplace, especially as artificial intelligence, cloud integrations, and security innovations redefine how services are delivered.
• Market Remains Competitive: Microsoft asserts that the cloud and desktop software markets are vibrant, with players like Google, Amazon, and an array of open-source alternatives, ensuring robust competition and consumer choice.

Amazon, facing its own scrutiny, has similarly pushed back—declaring that efforts to regulate licensing practices unfairly target only the largest providers, overlooking the health and diversity of the broader cloud ecosystem.

The Regulatory Pendulum: Antitrust, Bundling, and the AI Era​

The core regulatory question is whether Microsoft’s licensing and bundling strategies—especially around productivity suites like Microsoft 365—tip the scales too far, stifling competition. Recent European Commission scrutiny of Microsoft’s practice of bundling Teams with Microsoft 365, for instance, led to the company unbundling Teams in some markets, after competitors like Slack and Zoom alleged anti-competitive bundling.
The same lens now falls on the integration of AI tools, such as Copilot, into Microsoft 365 subscriptions. Critics warn these bundles can become “must-have” features, raising license prices and locking customers deeper into Microsoft’s ecosystem. While Microsoft maintains that its changes suffice to address complaints, EU regulators argue the moves don’t go far enough to undo the competitive harm.
By forcing customers, including ordinary consumers, to pay for Copilot as part of Microsoft 365—even if they never intend to use the AI service—the company has increased overall subscription costs and, according to some, further skewed consumer choice.

Pre-Owned Licenses: The Battlefield for Secondary Software Markets​

A central plank of the UK lawsuit is Microsoft’s opposition to a healthy secondary market for software licenses. Under EU and UK law, if a perpetual software license has been purchased, it can legally be resold, provided it is not in use elsewhere.
However, the suit contends that Microsoft thwarts this resale in a number of ways:

• Refusing to transfer perpetual licenses
• Tying licenses to individual user accounts or devices with technical controls
• Employing contractual clauses to prevent effective license transfer

This impacts not only business and public sector procurement, where cost-saving through pre-owned licenses would be substantial, but also consumers, whose used software holds theoretical resale value—a value Microsoft is accused of effectively nullifying.

Consumer Perspective: Do the Claims Match User Experience?​

A thread that runs through Windows enthusiast forums and user communities is frustration over regional price discrepancies, locked-down upgrade paths, and lack of transparency in licensing. European buyers, for instance, have long bemoaned paying dramatically more for the same Windows or Office products than their American counterparts, with the difference often exceeding what could be explained by VAT, tariffs, or distribution costs.
Moreover, when Technet and MSDN subscriptions were retired—or priced out of reach for many—access to affordable, legitimate Microsoft licenses decreased, driving a market for secondhand keys and perpetuating the sense that Microsoft’s ecosystem is closed, expensive, and inflexible for ordinary users.
Recent proliferation of cheap “lifetime” license deals via third-party resellers further illustrates the demand for alternatives to the subscription-first model. However, these gray-market licenses are not officially sanctioned, risk deactivation, and frequently lack long-term support or eligibility for security updates.

Market Impact: The Stakes for Businesses and the Public Sector​

The implications of restrictive licensing stretch beyond the individual buyer:

• Budget Efficiency: Large organizations, from NHS trusts to local councils, have historically relied on secondary markets to defray IT costs. If locked into Microsoft’s official licensing pathways, they may face vastly higher bills—costs that ultimately translate into higher prices for end services, or reduced budgets for other priorities.
• Choice and Flexibility: The lack of viable alternatives at scale means many organizations cannot shop around or negotiate. This “lock-in” stifles innovation and constrains reactions to strategic changes—such as adopting alternative cloud services or pivoting to open-source platforms.
• Legal Ambiguity: The risk of failed compliance audits and the ever-present possibility of license deactivation for those using pre-owned or discounted licenses create a climate of uncertainty for IT departments weighing cost vs. risk.

Critical Analysis: Weighing Strengths and Risks​

Strengths of Microsoft's Position​

• Global Security and Support: Centralized control enables Microsoft to provide timely security patches, updates, and consistent user experience across a vast array of devices and regions.
• Innovation through Investment: With a reliable recurring revenue stream from subscriptions and upgrades, Microsoft can continuously invest in research, rollout of new features, and platform development, including as-yet-unmatched AI integrations.
• Compliance Leadership: Especially in Europe, Microsoft’s Azure Local and other compliance-focused offerings aim to position the company as a partner for regulators and customers, aligning with GDPR and other regional privacy regimes.

Potential Risks and Regulatory Concerns​

• Consumer and Enterprise Lock-in: The lockout of secondary markets and device-tied, non-transferable licenses undermines traditional property rights and economic flexibility.
• Market Distortion and Overpricing: Disparities in regional pricing, restricted upgrades, and forced bundle purchases inflate costs and shrink choices—the precise outcome competition law aims to prevent.
• Reactive Settlements over Structural Change: While settlements with CISPE and others have introduced compliance and oversight elements, many in the industry remain skeptical that such moves truly level the playing field, rather than allowing Microsoft to “mark its own homework.”
• Precedents for the Digital Goods Economy: The outcome of this case may set the tone for digital property rights, resale, and fair competition in a world increasingly dominated by intangible assets.

Looking Forward: What’s at Stake for the Windows Ecosystem?​

The outcome of this lawsuit could go well beyond compensation for affected UK buyers. It may set new standards for how software licenses are defined, transferred, and enforced—not only in the UK but throughout Europe. Should the courts conclude that Microsoft’s conduct over the past decade was anticompetitive, the company could be required to overhaul its UK licensing terms, allow for the legal resale of perpetual licenses, and potentially pay considerable damages to consumers, businesses, and public agency buyers.
Wider ramifications might include:

• Increased competition in the productivity software market as secondary and open-source providers gain traction.
• More equitable pricing, as regional disparities come under further scrutiny.
• New definitions of software “ownership” in a cloud- and subscription-led economy.

Conclusion: The Battle for Digital Fairness​

This legal battle stands as a test case for the boundaries of fair conduct in the digital age. At stake is not simply Microsoft’s bottom line, but the fundamental shape of the software marketplace: whether consumers and organizations retain control of the software they buy, or whether subscription, technical controls, and bundling become the new norm.
As the case proceeds, Windows users and IT professionals should watch closely. The rules written today could determine not only the price paid for essential digital tools, but also the future of consumer rights, commercial competition, and innovation across the entire software ecosystem. Whether the UK legal system will force change upon one of tech’s oldest behemoths remains to be seen, but this case will surely echo through every licensing agreement—and every Windows device—for years to come.

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Source: TechRadar Microsoft hit by new legal claim over restrictive licensing and overcharging allegations

 

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Microsoft is once again at the center of a massive legal battle—this time, facing one of the largest class action lawsuits ever seen in the UK for its software licensing practices. The claim, estimated in the billions of pounds, alleges that the company overcharged both consumers and organizations for its flagship Office and Windows product lines since October 2015, and did so by using its market dominance to suppress meaningful competition. This latest action not only shines a spotlight on how Microsoft licenses its essential productivity software, but also raises broader questions about the dynamics of digital markets and the extent to which dominant players can shape the landscape to their advantage.

The Heart of the Allegations​

The crux of the lawsuit, led by barrister Alexander Wolfson, hinges on the claim that Microsoft strategically restricted competition specifically regarding new licenses from pre-owned licenses for its major products. This, according to Wolfson and the legal team at Stewarts, resulted in artificially inflated prices and an uneven playing field for millions of UK users, from individual consumers to large public bodies.
Wolfson's statement encapsulates the gravity of the matter: "Microsoft’s actions have had a significant and far-reaching impact on UK consumers, businesses, and public bodies. This claim seeks to hold Microsoft to account and to secure compensation for the many affected members of the class. With billions of pounds potentially at stake, this case is about ensuring fairness in the digital marketplace and ensuring even the largest tech companies play by the rules".
The legal request to the Competition Appeal Tribunal (CAT) for a Collective Proceedings Order (CPO) marks a significant step. If approved, this opt-out class action would automatically include all potentially affected parties—a substantial swath of individuals, companies, and public institutions who have purchased Microsoft software licenses since 2015.

How the Licensing Model Became Controversial​

At the heart of the controversy are two software products that underpin much of modern business: Microsoft Office and the Windows operating system. The allegations assert that Microsoft restricted the purchase and use of pre-owned licenses, which had previously offered a more affordable alternative, especially for smaller businesses and public organizations with tight IT budgets.
Officially, Microsoft has long maintained a model where software licenses are tightly controlled—often tied to hardware, time-limited, or bundled in subscription packages. Critics argue that this approach not only locks users into ongoing payments, but also blocks a legitimate market for second-hand software, which the European Court of Justice has previously ruled should be legal so long as the original license is rendered unusable by the seller.
By preventing or severely limiting the transfer of such licenses, the lawsuit claims Microsoft effectively stopped a key channel of competition. The result, in the view of the claimants, was a marketplace where the tech giant could control supply and, by extension, prices.

The Scale of the Impact​

Kate Pollock, head of competition litigation at Stewarts, offered a sobering assessment: "Microsoft’s conduct has had a profound and costly impact on millions of individuals and private and public sector organizations that rely on its software for daily business operations. We believe that Microsoft abused its market dominance by imposing restrictive licensing practices that effectively shut down competition and inflated prices."
For context, Microsoft Office and Windows power the majority of personal computers and business workstations in the UK and globally. The interdependence between these products and broader IT infrastructure means that even minor price shifts reverberate wide and deep—affecting not just monetary costs, but also procurement strategies, innovation, and even the ability of smaller players to compete or survive in a software-driven world.

A Pattern of Legal Scrutiny​

This latest lawsuit comes after a series of similar legal challenges against Microsoft—painting a picture of recurring disputes over the company’s approach to licensing and market competition. Late last year, Microsoft faced a separate £1 billion lawsuit over claims that it charged significantly higher licensing fees for Windows Server when customers opted to host on rival cloud platforms like Amazon Web Services (AWS), Google Cloud Platform (GCP), or Alibaba Cloud, rather than Microsoft’s own Azure. The core issue here, too, was the use of licensing leverage to prefer its own ecosystem and potentially stifle cloud market competition.
Meanwhile, Microsoft has been under ongoing investigation by the UK's Competition and Markets Authority (CMA) following a referral by Ofcom—the UK telecoms regulator. Ofcom raised concerns that large cloud providers, including Microsoft, may be using their dominance in software products to distort competition in cloud computing. A ruling from the CMA on this matter is anticipated soon; its findings could further recalibrate the regulatory approach to software licensing and market dominance in the UK.
Notably, in the European Union, Microsoft recently avoided a formal antitrust investigation by settling with the Cloud Infrastructure Services Providers in Europe (CISPE), paying €20 million and pledging changes to certain licensing practices. This settlement suggests an awareness of growing pressure—and a possible shift, however incremental, in how Microsoft addresses competition concerns on both sides of the Atlantic.

The Cloud Dimension: A New Battlefront​

While the current lawsuit centers primarily on desktop software, it cannot be disentangled from parallel debates around Microsoft’s conduct in cloud computing. Increasingly, customers are looking to deploy Windows and Office in hybrid or fully cloud-based scenarios. The lawsuit’s claims about restricting competition for licenses echo similar complaints in the cloud sphere—where Microsoft has faced criticism for making it more expensive or technically complex to run its software on non-Microsoft clouds.
This practice, sometimes called “Bring Your Own License” (BYOL) restrictions, means that even if organizations own Windows or Office licenses, they may need to pay hefty fees or navigate complex compliance rules to deploy the software on third-party infrastructure. Critics contend that such policies further consolidate Microsoft’s hold over the wider enterprise software stack, raising both operational costs and barriers to switching providers.

Key Technical and Legal Questions​

A central technical question in the case is whether Microsoft's license terms since 2015 have indeed prevented genuine competition from the pre-owned license market, and if so, whether this constitutes an abuse under UK and European competition law. The European Court of Justice decision in the UsedSoft case (2012) affirmed that software authors cannot oppose the resale of their licenses in the EU, provided the original copies are rendered unusable—an important precedent.
The class action now asks whether Microsoft’s behavior since then has adhered to, or subtly circumvented, this legal framework. If proven, such conduct could not only result in substantial damages but also force Microsoft to change how it structures and enforces license agreements.
At stake are broader questions about software ownership in the digital age: Are users genuinely buying software, or only renting usage rights? How much control should a vendor retain over software once it has been “purchased”—especially as the line blurs between on-premises licenses and subscription-based SaaS models?

Industry and Consumer Reactions​

Initial reactions from the business community have featured a mix of cautious optimism and underlying frustration. Many IT managers and procurement officers have long criticized the complexity and opacity of Microsoft’s licensing terms. The promise of potential compensation, combined with the possibility of more transparent and competitive license markets, has been welcomed by advocacy groups.
Consumer champions point to the broader implications for digital fairness: “If even a company as central to global IT as Microsoft can be brought to account for unfair practices, it sets a precedent across the industry,” noted one UK digital rights advocate. At the same time, some analysts warn that changes to licensing regimes could introduce new uncertainties, especially for organizations already deeply wedded to Microsoft ecosystems.

Microsoft’s Position—And Its Silence​

At the time of publication, Microsoft had not issued an official response to the allegations raised in this lawsuit. Historically, the company has contested such claims vigorously, pointing to the need for licensing models that protect intellectual property, ensure software integrity, and allow for ongoing innovation. However, Microsoft has also shown signs of compromise—most notably in its EU settlement with CISPE, where it both paid damages and agreed to modify certain software licensing practices.
Observers will be watching closely to see whether the company now pursues a similar course in the UK, or chooses to fight the claims in court.

Implications for the Digital Marketplace​

This case strikes at the heart of digital market competitiveness. Microsoft, as one of the few truly universal software providers, holds an outsized influence over IT procurement, integration, and operations for countless organizations. If the claimants succeed, the consequences will likely ripple far beyond the UK—potentially affecting licensing norms, pricing strategies, and regulatory oversight across Europe and even globally.
Potential outcomes range from financial compensation for users, to mandatory changes in how licenses can be resold or transferred, to even broader investigations by national and international competition authorities.

Notable Strengths of the Case​

• Sheer Scale and Inclusivity: By structuring the lawsuit as an opt-out class action, the legal team has maximized the class size—and therefore the potential impact. This format alleviates the burden on individual claimants, making it a more feasible avenue for small businesses and consumers to participate.
• Precedent and Legal Frameworks: The case leverages established legal precedent (notably the EU’s UsedSoft decision) that supports the legitimacy of the pre-owned software license market.
• Broader Regulatory Momentum: The lawsuit doesn’t exist in a vacuum. Similar probes by UK and European regulators, as well as the US and other markets, indicate sustained global interest in restraining anti-competitive behavior by digital giants.

Key Risks and Challenges​

• Complexity of Software Licensing Law: Software licensing is notoriously intricate, with vendors often embedding restrictions in lengthy and opaque terms and conditions. Proving a systemic abuse of dominance, as opposed to legal but aggressive business strategy, may be challenging.
• Microsoft’s Defense: The company will almost certainly argue the legitimacy of its licensing practices, citing the need to control piracy and protect its intellectual property. Microsoft has significant legal and financial resources to mount a sustained defense.
• Potential for Regulatory Overreach: Some in the industry caution that overly aggressive regulation or forced changes to licensing could hamper innovation or lead to new unintended consequences, such as increased costs in other areas or degraded software support.

The Road Ahead​

The next milestone for this case is the Competition Appeal Tribunal’s decision on whether to grant the Collective Proceedings Order. If approved, it will be among the most significant UK class action suits in terms of both size and precedent for software consumers. Legal experts note that cases of this magnitude often take years to resolve, and settlements (as seen in the EU) remain possible.
Meanwhile, regulatory scrutiny of Microsoft’s licensing practices—especially in cloud and hybrid deployments—will likely intensify, particularly if the CMA and other authorities see this lawsuit as further evidence of market power abuse. Organizations in the UK and beyond should monitor developments closely, as both the outcome of the lawsuit and any regulatory actions may affect not only the cost of Microsoft software, but also the flexibility with which it can be deployed and managed.

Conclusion: Testing the Boundaries of Digital Fairness​

This lawsuit is more than just a dispute over software pricing; it’s a test of the boundaries of fairness, competition, and user rights in a digital marketplace increasingly dominated by a small number of mega-vendors. For Microsoft, the stakes are significant—not only in terms of potential financial penalties, but also in the form of reputational risk and the possibility of enforced changes to longstanding business practices.
Whatever the outcome, the issues raised in this case highlight the critical importance of transparent, competitive markets—especially as software continues to permeate every aspect of economic and civic life. With billions at stake and millions of users potentially affected, the final verdict will echo far beyond Microsoft, shaping the future rules of the digital road.

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Source: IT Pro Microsoft faces another lawsuit over software licensing practices