Damages claim of £270 m for loss of sales in UK and EU from 2016 onwards - Microsoft breached UK and EU competition law by suppressing preowned software licenses.
PRESS RELEASE
London and Brussels, 8 April 2021: ValueLicensing, a UK-based preowned software licence reseller, has filed a claim in the High Court in London against Microsoft for abuse of dominance and restrictive contractual practices.
ValueLicensing asserts that Microsoft has stifled the supply of preowned Microsoft licences in the UK and the EEA. Abusing the power of its dominant position, Microsoft has imposed anticompetitive contractual clauses on organisations, both public and private, restricting the resale of perpetual licenses as a condition of agreeing a discount. The net result has been higher prices and less choice for customers, who have been steered into cloud-based Office365 and Azure subscriptions. The claim covers perpetual licences for desktop software (Windows, Office and related products), but there may also have been damage relating to licences for other products.
Since at least 2016, Microsoft has been imposing contractual prohibitions applying to users in the UK and the EEA on most Enterprise customers holding surplus perpetual licences, making the resale of their licences impossible, as a condition for obtaining discounts from Microsoft. Absent the contractual restrictions, potential customers were not able to buy perpetual licences from companies such as ValueLicensing which would have been attractive to them. A combination of these relinquishment and retention of licenses condition clauses, and non-disclosure agreements (NDAs) has eliminated most preowned licenses from the market.
Microsoft is the dominant provider of office software applications and operating systems. By suppressing the availability of preowned perpetual licenses that compete with its latest Office365 product lines, it has tried to minimise the activities of its reseller rivals and protect and further entrench its monopolistic position.
ValueLicensing is asking the High Court in London to award damages for the loss it has suffered as a result of Microsoft’s conduct – specifically lost UK and EEA sales of desktop products in the period 2016 to today, which would have resulted in an estimated gross profit of approximately £270 million (€313 million). Losses are continuing and ValueLicensing reserves the right to amend the scope of the claim.
In its High Court claim ValueLicensing is also seeking interest, declaratory relief, other relief and costs. It takes the view that various measures are essential to fully restore and maintain competition and choice in the market, including:
- that Microsoft bring its illegal conduct to an end quickly and effectively and refrain from any measure that has the same or an equivalent object or effect as those practices;
- a finding that the restrictive clauses on relinquishment and retention in existing agreements are illegal and unenforceable;
- the removal of NDAs impacting trade in perpetual licences from Microsoft’s agreements with customers.
Jonathan Horley, founder and managing director of ValueLicensing said: “Microsoft’s illegal behaviour has impacted almost every organisation that provides desktop software for its workforce in the UK and the EEA. ValueLicensing is not the only victim. In purchasing software, public and private-sector organisations presently have little option but to move to subscriptions offered by Microsoft, because there are so few preowned perpetual licenses available now, as a result of Microsoft’s campaign to almost entirely drain the market.
“Microsoft is an unavoidable partner. Its software is integral to virtually all organisations. Its position of
economic strength enables it to prevent effective competition being maintained for preowned perpetual
licences because it has the power to behave to an appreciable extent independently of its competitors and
taxpayer-funded public-sector organisations and private-sector businesses of all sizes.”
In the UK and a number of EEA countries, governments at various levels have entered into framework agreements with Microsoft containing the restrictive clauses. Individual public entities covered by those framework agreements are automatically subject to the restrictive clauses.
In the UK, a three-year Digital Transformation Arrangement MOU (DTA) which comes up for renewal this month is in place between the Crown Commercial Service (CCS) and Microsoft, covering government departments, local authorities and police forces. ValueLicensing recently wrote to the CCS expressing its view that restrictive clauses in the DTA breach competition law and pointing out that renewing the DTA on the same terms would lead to further breaches.
Background
The resale of preowned perpetual software licences is legally underpinned in the EEA by the European Court’s landmark 2012 decision in UsedSoft GmbH v Oracle International Corp. (C-128/11, 3 July 2012). Asked to rule on when a software copyright holder’s distribution right in software which it had licenced in perpetuity became exhausted under the 2009 EU Software Directive, the court found that such licences can be legally resold as long as they are for an unlimited period, that they are fully bought and paid for and were first placed on the market within the EEA.
About ValueLicensing
JJH Enterprises Ltd, trading as ValueLicensing, was established in 2009 in the UK and with a subsidiary in Belgium, is a certified provider of preowned Microsoft licences. It specialises in the purchase and resale of redundant Microsoft Volume Licences. Such licences offer significant savings when compared to purchases from Microsoft, its resellers and distributors.
Contact
+44 20 7993 6041