Could they do it? Deactivate Windows licenses, block Cloud services, access to Office 365 and whatnot?
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Yes and no.
For non-cloud stuff, the EU would quickly legitimize cracks that circumvent anything they would try.
For Cloud stuff, they can more easily turn that off, but then they would need to forfeit all their EU business and assets.
Would they legitimize cracks, though? I can’t see that happening. That would be a far reaching legal precedent.
They would immediately nationalize Microsofts Europe operations and the crack would be an official patch signed and released by Microsoft Europe.
No sick ASCII art though.