Competition Appeal Tribunal – Microsoft Class Action Brought 

Thousands of UK businesses could be entitled to compensation if a legal claim against tech giant Microsoft proves successful.

Regulation expert Dr Maria Luisa Stasi, as originally reporting to the BBC, has accused Microsoft of overcharging companies for its Windows Server software, widely used in cloud computing. She is seeking over £1 billion in damages on behalf of UK businesses.

The case is being filed on an “opt-out” basis, meaning all eligible UK organisations are automatically included unless they choose to opt out. This is one of several class action lawsuits brought before the UK’s Competition Appeal Tribunal against major tech firms, with companies like Facebook, Google, and mobile phone providers also facing similar claims.

Such claims are relatively new in the UK, having been introduced in 2015 via the creation of the Competition Appeal Tribunal, and there is limited precedent to predict outcomes. Any resolution is likely to take years, and given the large size of the claim and volume of potential Claimants, the costs consequences for both sides are likely to be significant.

This lawsuit coincides with the UK’s Competition and Markets Authority (CMA) investigation into the cloud computing industry. Cloud computing enables data storage and access online, playing a crucial role in modern business operations and services, including data storage and streaming.

Businesses often use Microsoft’s Azure platform or alternative providers like Amazon and Google, which may license Microsoft software. Google has previously criticised Microsoft’s licensing practices, claiming they increase competitors’ costs and stifle competition. Microsoft has strongly refuted these allegations, asserting that its licensing terms do not significantly raise costs for rivals.

The legal claim alleges that Microsoft’s practices have harmed “many thousands” of UK businesses, particularly smaller firms. Figures from the Office for National Statistics show more businesses closed than opened in 2022, highlighting the challenges faced by small enterprises.

“Microsoft is penalising UK businesses and organisations for using cloud services from competitors like Google, Amazon, and Alibaba by charging them higher prices for Windows Server,” Dr. Stasi said. “This lawsuit seeks to expose Microsoft’s anti-competitive behaviour, quantify the financial impact on UK businesses, and secure compensation for those unfairly overcharged.”

What is the Competition Appeals Tribunal?

The Competitions Appeal Tribunal (CAT) was setup to provide a means of issues relating to market competition or regulatory issues to be dealt with via a specialist judicial body.

Claims brought before the CAT generally involve multi-national corporations who potentially have significant influences or monopolies in certain markets, and prevent fair competition arising through certain practices, which in turn harms the end consumers.

Such large corporations can often go unchecked or unchallenged due to their size and the costs of funding such litigation, which is why specialist law providers in this niche sector quite often operate with the support of litigation funders, who stand to make a profit out of such large scale litigation if successful through the recovery of deductions from damages, and also the recovery of legal costs.

The Competition Appeal Tribunal Rules 2015 set out the relevant procedural rules to be followed in relation to these cases, and is akin in many ways to the Civil Procedure Rules utilised in standard civil litigation.

Sections 45 – 49, and Section 98 of the Rules sets out the costs implications of the proceedings, which very much follows the general principles set out in CPR 44.2(2)(a), that “the unsuccessful party will be ordered to pay the costs of the successful party”.

In addition, there is the encouragement for the parties to try and resolve the matters amicably, and Section 45 of the Tribunal Rules is akin to a CPR 36 Offer.

Costs Implications Moving Forward in the Microsoft CAT Proceedings

The cost implications of the competition appeal tribunal Microsoft case are significant for various stakeholders, including businesses and Microsoft itself.

If the case succeeds, thousands of UK businesses could receive payouts, with the total compensation sought exceeding £1 billion. This could help offset overcharging costs and improve financial stability, particularly for small firms that were disproportionately affected.  It is unlikely that the specific amounts recovered by each business are likely to be significant, but when amalgamated across all the business that rely upon Microsoft, the total damages award could be significant.

While the case is being filed on an “opt-out” basis, businesses that choose to actively participate may incur minor administrative expenses, such as legal consultations or paperwork processing.

For Microsoft, a negative outcome could encourage further claims in the UK or other jurisdictions, increasing potential liabilities globally as well as causing reputational harm.

Given the large swathe of evidence to be considered and challenged, and the value of the overall dispute, it is likely that the legal costs will be significant, and amount to tens of £millions.  Such costs may need to be budgeted as part of the CAT case management process under Sections 19 and 53 of the Tribunal Rules.

Who are ARC Costs & How Can we Assist?

ARC Costs are a team of independent and experienced Costs Draftsman and Costs Lawyers, that specialise in the increasingly complex area of legal costs which follow the conclusion of a legal action.  In high value disputes such as those dealt with in the CAT, costs are substantial and require the assistance of a specialist team in quantifying and recovering such costs, or if representing the Paying Party, challenging the amounts claimed and seeking to reduce the financial exposure to such costs claims.

We are an experienced and independent team of specialised Costs Draftsmen and Costs Lawyers who can assist either paying or receiving parties in resolving costs disputes. We are adept at preparing Costs Budgets mid-litigation in order to predict and obtain approval of future expenditure, and on conclusion of disputes we assist in the preparation of Bills of Costs for receiving parties, as well as providing legal costs negotiations services and preparing Points of Reply.

For paying parties, we are adept at preparing Points of Dispute, and ensuring that a proportionate level of costs is recovered. Proportionality is a subjective issue, and it is therefore important you have the right legal costs representative on your side during detailed assessment. This is to ensure you make the most persuasive submissions on the issue.  

If you would like more information on any of our services or wish to speak to a member of our costs team about your case, then please do not hesitate to contact us. Please call us at 01204 397302, or email one of our costs experts direct on info@arccosts.co.uk.

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