MD of preowned licence reseller opens up on £270m lawsuit against Microsoft

ValueLicensing alleges that Microsoft has carried out a 'campaign to keep pre-owned licenses off the market'

The managing director of a preowned licensing reseller involved in a £270m damages claim against Microsoft says the vendor's "anti-competitive" conduct closed off a big gap in the market for preowned licensing resellers when customers moved towards subscription-based services.

In a state of claims legal document outlining its case, UK-based ValueLicensing alleges that, from around 2016, Microsoft has been undertaking a "campaign to keep pre-owned licenses off the market". This includes installing clauses into contracts which offer customers discounts in return for not selling on their old licenses, as well as the relinquishing of these perpetual licenses.

It argues that Microsoft has broken anti-competition laws - specifically section 18 of the Competition Act 1998 and articles included in the Treaty on the Functioning of the European Union - and that the vendor has "paid customers to protect it from the competition", which in turn has cost ValueLicensing £270 million in lost profits, it claims.

And managing director Jonathan Horley told CRN that these, and other, measures meant the "cupboard was bare" for businesses like ValueLicensing, which sells to both private and public sector organisations, at a time when business should have been booming.

"Around about 2016, the market changed from looking to buy licences from insolvencies to looking to buy licences from companies which had moved to subscription services," he said.

"The point any organisation moved from perpetual licences and licence and software assurance to subscription, the old perpetual licences should have been left behind, and that should have enabled organisations like us to basically buy those and then sell them on to other organisations that wanted them.

"The volume of licences that we would need to have a functioning market just doesn't exist anymore. And it doesn't matter whether it was central government framework agreement, like the digital transformation arrangement, it doesn't matter whether they were organisations small or large, these licences were effectively being removed from the market on an industrial scale."

Microsoft responded claiming that it has now removed an offer which had allowed customers to move to the cloud by allowing them to apply the value of their old licenses to a new cloud subscription, but said it will continue to provide a cloud subscription discount to its customers.

The legal case between the two companies is ongoing and Microsoft would not comment on claims from ValueLicensing that the vendor was seeking to have the case struck out, only that it "cannot comment on ongoing legal matters". ValueLicensing says a hearing for the case is due to take place in March next year.

While ValueLicensing's lawsuit is focused on Windows and Office products for desktops, it claims that Microsoft has removed licences "with a cumulative value of between £23bn and £41bn" when taking into account other products such as Microsoft Azure, Azure SQL or Microsoft Remote Desktop Services".

The reseller says it is seeking "to ensure that Microsoft brings such conduct to an end quickly and effectively, and refrains from any measures with the same or equivalent effect", and Horley believes Microsoft's alleged conduct has also impacted those looking to buy preowned licenses.

"We know that the public sector historically over the years has wanted to save money by sweating their assets," he added.

"Realistically, these organisations were only given one choice. Who was the only dominant player in the market for these types of products? Microsoft.

"Competition rules are not there to protect people like me, they're there to protect consumers, they're there to protect organisations which should have the opportunity to get the best products at the best value.

"If organisations like Microsoft abuse their dominant position and, as we allege, remove the vast majority of licenses from the market, then how is competition helped by that happening?"