Google’s $512M sweetener for Europe firms failed to derail deal with Microsoft

What just happened? Confidential documents have revealed that Google offered a lucrative package worth over $500 million to cloud firms, hoping to keep their antitrust complaint against Microsoft alive. However, the ultimately opted to cut a deal with the Windows maker instead.

Bloomberg notes that the rejected proposal outlined a generous five-year partnership. At its core, it had around €455 million in Google Cloud licenses bundled with €14 million in cash incentives. However, it came with a notable string attached – the conglomeration of companies known as the Cloud Infrastructure Services Providers in Europe (CISPE) had to continue its EU antitrust grievances targeting Microsoft’s software licensing practices.

The overture seems to have been further sweetened by a separate roughly €6 million contribution from Amazon Web Services. However, despite these substantial added incentives, the pan-European cloud providers stuck to their guns with Microsoft.

Under the Microsoft agreement, CISPE members gain enhanced access to Azure cloud services and can deploy Microsoft business applications through their local infrastructures. Insiders claim Microsoft also pledged around €10 million to the association as part of the agreement.

Google has consistently lagged behind Amazon and Microsoft in the cloud market, although its division has shown impressive momentum recently. After achieving profitability last year, the company’s Cloud Platform raked in a $900 million operating income in Q1 2024 – solidly exceeding Wall Street projections. Any increase in regulatory scrutiny of Microsoft’s cloud dominance will further aid Google’s ascent.

The European Commission is known for its massive Digital Markets Act antitrust fines of up to 10 percent of global revenues. The nature of the DMA creates compelling incentives for tech giants to proactively settle complaints from groups like CISPE to avoid potential mega-penalties down the line. Although Microsoft has resolved CISPE’s cloud grievances, it still faces EU heat on other fronts. The company’s $13 billion stake in OpenAI is under the regulatory microscope over the AI firm’s exclusive reliance on Azure cloud services.

The original CISPE antitrust grievance stemmed from allegations that Microsoft abused its market position by tying its productivity software like Office to its Azure cloud platform. The move purportedly made it difficult for customers to switch to rival cloud providers, hampering competition in the European cloud market.