Amazon Web Services (AWS) and Microsoft aren’t pleased with the UK’s Competition and Markets Authority (CMA) suggesting a targeted approach to leveling the playing field for smaller cloud providers. The CMA’s ongoing investigation paints the UK cloud infrastructure market as a two-horse race, with AWS and Microsoft leading far ahead.
The CMA claims these companies hold “significant unilateral market power” that harms competition, making it tough for smaller providers to gain traction. They’re looking to use the Digital Markets, Competition and Consumers (DMCC) Act 2024, set to activate on January 1, 2025, to impose legally binding pro-competition measures on both giants, labeling them as Strategic Market Status (SMS) suppliers. This label means their actions can heavily influence market dynamics due to their strong position.
The CMA’s provisional findings suggest that targeting AWS and Microsoft could help most UK customers by changing competitive dynamics in the cloud services market. AWS characterized the proposed measures as “unwarranted,” especially citing the CMA’s criticism of Microsoft for raising prices on its software when used on competitors’ platforms. Rima Alaily from Microsoft argued that the focus should shift to supporting the UK’s AI future instead of dwelling on outdated products.
Microsoft’s licensing practices are being scrutinized globally, not just by the CMA, and they’re also embroiled in a legal challenge in the UK. The CMA highlighted Microsoft’s ability to limit competition by making its software less accessible on AWS and Google platforms.
Now that the CMA has released these provisional findings, all players in the UK cloud services market can comment until February 25, 2025. The final verdict is expected by August 4, 2025. The CMA firmly states that AWS and Microsoft’s dominance calls for intervention to ensure the market operates fairly.
They also explored other factors affecting competition, such as committed spend discounts. The CMA believes these discounts impact customer choices but noted that rival companies can effectively compete against them, so no action is necessary on that front.
However, the CMA found significant barriers to entering the cloud market due to hefty capital investments needed for infrastructure like data centers. AWS and Microsoft benefit from their size, keeping their costs lower than those of smaller players. The report states that although these big investments can enhance competition, they might also scare off potential rivals.
The broad offerings from AWS, Microsoft, and Google can also create entry obstacles. This extensive service range is crucial for customers choosing a cloud provider.
Another concern is the technical challenges and interoperability issues customers face when trying to work with multiple cloud providers. The CMA pointed out that egress fees—which penalize moving data from one platform to another—hinder the ability to switch providers. This situation could lead customers to pay higher prices for cloud services.
Given these findings, the CMA is urged to consider targeted actions against Microsoft and AWS under the newly established DMCC Act. This could lead to pro-competitive measures that would benefit the broader UK customer base by improving competition with other cloud providers.
Industry experts generally support the CMA’s moves. Niamh Christina Gleeson believes that targeting only AWS and Microsoft will help smaller competitors thrive. She noted that the SMS designation would obligate these companies to act in a way that fosters competition. Behavior that might be acceptable for smaller firms could be considered abusive for those with SMS status.
Legal experts also see this as an opportunity for customers to voice their concerns. The CMA’s process could provide a more structured method to address specific behaviors of these companies in the cloud market.
Nicky Stewart from the Open Cloud Coalition expressed hopes that the CMA will act swiftly after the consultation. The longer the delay, she argues, the more opportunities for innovation and economic growth are lost. Every expense tied to restrictive practices is a loss for the UK’s economic potential.