UK raises cloud competition concerns, names Microsoft and Amazon as dominant players

Britain’s antitrust watchdog on Tuesday raised concerns over competition in the multi-billion-pound cloud computing market and singled out Microsoft and Amazon as the dominant players.

An independent Competition and Markets Authority inquiry group provisionally recommended that the regulator considers investigating Amazon Web Services (AWS) and Microsoft’s Azure cloud unit under the new Digital Markets, Competition and Consumers (DMCC) Act.

In a statement, the CMA said it estimates the cloud services market was worth £9 billion ($11.18 billion) in 2023 — a figure growing over 30% year-on-year. The CMA noted that, currently, businesses face a limited choice of providers when it comes to cloud services.

The regulator called AWS and Microsoft “the two large providers of cloud services, each with a share of up to 40% of UK customer spend on cloud services.”

Notably, it added Google was the third-biggest provider “with a much smaller share.”

‘Not warranted’

The provisional findings recommended that the CMA should consider a probe into AWS and Microsoft’s cloud unit to determine whether they should be designated as having “strategic market status” (SMS).

This would subject them to new restrictions that the regulator can impose under the DMCC to prevent anti-competitive behavior.

Rima Alaily, corporate vice president and deputy general counsel of competition law group at Microsoft, said over email that the CMA inquiry group’s draft report “should be focused on paving the way for the UK’s AI-powered future, not fixating on legacy products launched in the last century.”

“The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation. What could be better for UK businesses and government?” Alaily added.

An AWS spokesperson said the CMA’s recommended intervention “is not warranted,” adding that “the evidence demonstrates the IT services industry is highly competitive.”

“Cloud computing has lowered costs for UK businesses with on-demand services and pay-as-you-go pricing, expanded product choice, and increased competition and innovation,” the AWS spokesperson added.

The Amazon division urged the CMA to “carefully consider how regulatory intervention in other areas will stifle innovation and ultimately harm customers in the UK.”

Alex Haffner, a competition partner at Fladgate, said the CMA inquiry group’s provisional decision to probe whether AWS and Microsoft have strategic market status under the DMCC could result in a prolonged review.

He nevertheless added that, “assuming such SMS is found, the CMA will argue it will have more arsenal at its disposal to use in order to keep the parties in check and in keeping with the way it is looking to deal with Big Tech more generally.”

Last week, the CMA opened an SMS probe into Google and Apple examining their huge mobile empires — from app stores to operating systems.