- Microsoft’s Initial Response: “PCR Must Show a Credible Way to Prove Abuse”
By Sylwester Frazzoni in London
The afternoon session of the first day of the CPO application hearing turned from allegations to the funding arrangements underpinning the proposed class action, with Robert Marven KC outlining the structure of the PCR’s funding package and responding to Microsoft’s concerns about the reliability of the funder, LCM Funding UK.
Marven began by stressing that Microsoft did not allege insufficient capacity to cover Microsoft’s recoverable costs; instead, its challenge targeted the PCR’s ability—through her funder—to sustain her own costs over the life of the litigation. He reminded the Tribunal that this is a “just and reasonable representative” issue rather than an audit of funding strength.
The application seeks a Collective Proceedings Order (CPO) on behalf of UK organisations that licensed Windows Server via Amazon Web Services, Google Cloud, or Alibaba Cloud (“listed providers”). The PCR alleges that Microsoft used its dominance in the paid server operating systems market to weaken rival cloud providers and lock customers into Microsoft Azure—conduct said to infringe s.18 Competition Act 1998 and Article 102 TFEU.
Tribunal intervention: withdrawal, viability and safeguards
The Tribunal pressed Marven on two clauses in the amended funding agreement. First, restrictions on discontinuance were viewed as satisfactory, with disputes about the reasonableness of legal advice capable of being referred to arbitration.
But the panel focused more sharply on Clause 17.1, which allows the funder to terminate if the claim is “no longer economically viable”. The Tribunal queried what this test meant in practice, noting that in other cases the term has been expressly tied to a material adverse change relative to the position at the outset.
The Tribunal suggested the PCR consider overnight whether the clause should be amended to clarify that economic viability must be assessed from the perspective of the class, not the funder, particularly given questions raised about LCM’s own financial position.
A further suggestion followed: the Tribunal encouraged the PCR to consider appointing an independent costs adviser, a practice adopted in some other collective actions. Marven did not resist the idea but noted that such appointments bring additional cost.
LCM’s structure, disclosures and the Gutmann precedent
On substance, Marven emphasised that at least 62% of the budget is funded through LCM’s managed third-party fund, corrected from “up to 62%” in an earlier statement. The balance comes from LCM’s own resources, supported by a Northleaf credit facility renewed in December 2024.
He argued Microsoft’s critique was largely a rerun of points already rejected by the Tribunal in Gutmann v Vodafone, including challenges to LCM’s structure, financial resilience, and absence of a parental guarantee. Marven underlined that LCM’s parent company is AIM-listed and therefore subject to continuous disclosure obligations: any material deterioration would have to be reported publicly, meaning “both Dr Stasi and Microsoft would know at the same time”.
The Tribunal explored whether LCM’s recent financial turbulence—highlighted in its 2025 annual statement—should prompt greater caution. Marven relied on Gutmann, where similar concerns were deemed insufficient to deny certification, particularly because the Tribunal retains ongoing supervisory powers and can require updates on funding status.
He also pointed to evidence that alternative funders would likely step in if certification were granted and LCM later faltered, as post-CPO claims are viewed more favourably in the market.
Tribunal’s probing on figures
The Tribunal then walked through headline numbers: a £14 million budget, of which roughly £8.7 million is committed third-party funding, leaving about £5.3 million dependent on LCM’s own balance sheet. The panel queried the robustness of LCM UK’s position—given its assets of £41 million and competing demands—and asked whether any internal arrangements existed between the UK subsidiary and the listed parent. Marven maintained it was “inconceivable” that a global funder of LCM’s profile would default on obligations in a high-visibility UK collective action.
The Tribunal also raised the absence of ALF Code compliance, noting that in other cases funders had provided undertakings mirroring capital adequacy requirements. Marven’s position was that such reassurances were unnecessary and had previously been rejected.
Microsoft’s Initial Response: “A Credible Methodology Is Essential”
In the final eight minutes of the day, Brian Conolly KC briefly opened Microsoft’s substantive reply. He distilled the dispute to a simple proposition: the PCR alleges that Microsoft’s pricing of Windows Server has excluded rival cloud providers, but she must show a credible methodology for proving both that the pricing is not competition on the merits and that it is capable of excluding those rivals.
Microsoft warned that the Tribunal must be satisfied the PCR has a realistic plan to demonstrate abuse in a case with an estimated value of up to £2 billion. Conolly suggested that a margin-squeeze analysis—“the obvious tool” for vertically integrated markets—had been avoided precisely because AWS and Google, the alleged victims, are among “the largest companies in the world” and far from struggling entrants.
He pointed to market share data showing Amazon maintaining dominance, Microsoft growing, and Google tripling its UK share, as well as evidence that 75% of virtual machines run on Linux, not Windows Server—facts he said were inconsistent with the theory of rivals being squeezed out.
The hearing continues with Conolly continuing his submissions on Friday morning.
The case is brought by Dr Maria Luisa Stasi, represented by Sarah Ford KC of Brick Court Chambers and Robert Marven KC of New Square Chambers for the Proposed Class Representative (PCR), instructed by Scott+Scott.
Brian Connely KC of Blackstone Chambers appeared for Microsoft, instructed by Linklaters.
The three-member panel is chaired by Mr Justice Adam Johnson, sitting with John Davies and Lesley Farrell.
