Ofcom said it had received evidence showing Microsoft was making it less attractive for customers to run their Office productivity applications on cloud infrastructure other than Microsoft Azure.

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Microsoft was accused on Friday of abusing the dominance of its Azure cloud computing unit to squeeze out — and in some cases evaporate — the profit margins of rival cloud platforms in Europe.

The claim came in a complaint by CISPE, a trade organization for infrastructure-as-a-service cloud firms in Europe. It also comes as the Redmond, Washington-based tech giant faces intense scrutiny over its cloud computing and software licensing practices in the European Union, as well as the UK and US

The claims stem from changes Microsoft made to its licensing terms in 2019. Under those rules, Microsoft requires businesses to purchase a software assurance license and “mobility rights” if they want to deploy their Microsoft software on hosted cloud services offered by competing suppliers.

Customers also cannot rely on perpetual licenses they have already purchased to run Microsoft applications on so-called “listed vendors” such as Alibaba, Amazon, Google and Microsoft itself. Instead, they will have to buy new licenses. Meanwhile, some software, including Office 365 Windows Apps, was banned from running on rival clouds.

The terms are a source of intense anger from rival cloud companies in Europe, such as France’s OVHCloud and Italy’s Aruba, as well as big tech rival Amazon. It also forms the basis of an investigation by the European Commission that seeks to determine whether Microsoft’s cloud practices are anti-competitive.

Microsoft declined to comment when contacted by CNBC. In 2022, Microsoft President Brad Smith wrote a blog post saying it is reviewing its licensing deals and making it easier for cloud providers to compete.

In its complaint on Friday, CISPE, which is heavily funded by Amazon, showed an example in its research where a member cloud firm, whose name was not disclosed, saw revenue from the sale of Microsoft products, including Windows Server and SQL Server services , to rise 300% from 2018, contributing to Microsoft’s own growth.

But the unnamed cloud provider’s profit margin growth hasn’t matched Microsoft’s, and in fact, the rival cloud provider saw its margins decline from a positive percentage in the mid-twenties in 2018 to double-digit negative profit margins in 2023.

The biggest drop in profit margins for this cloud firm occurred in 2019, the same year Microsoft changed its licensing terms in favor of licensing Azure software, CISPE said. From 2019 to 2020, the relevant CISPE member saw its margin drop from over 20% to zero.

CISPE also said members shared evidence that the price they were charged for Microsoft’s SQL Server was much higher than the price Microsoft quoted for customers using Azure.

For example, a company licensing Microsoft’s software to host and deliver their applications will have to pay €612.27 ($670) for a 2-core SQL Server Enterprise product, €92.01 more than what Microsoft charges customers on average , using Azure (€520.26), according to CISPE data.

The complaint and findings add to previous research by Frédéric Genny, a professor of economics at ESSEC Business School in Paris who specializes in competition law, on CISPE. Jenny found that Microsoft effectively charged businesses a 28% “tax” to run their software products on competing cloud services.

The European Commission told CNBC: “The Commission has received several complaints regarding Microsoft, including in relation to its Azure product, which we are assessing based on our standard procedures. We have no further comment at this stage.”

The UK Competition and Markets Authority, which took over from media and telecoms regulator Ofcom to investigate competition in the UK cloud computing market last year, was not immediately available for comment when contacted by CNBC.