The Competition and Markets Authority (CMA) has said it may use new powers to investigate AWS and Microsoft following a 14-month investigation in the UK cloud services marketplace. In provisional findings published earlier today, the CMA said that competition in the sector was deficient, with cloud customers faced with both a limited choice of providers and technical barriers that prevented users from easily switching between services. A final decision on remedial action will be taken by August 2025, said the chair of the CMA’s independent inquiry group, Kip Meek – measures that could include investigating AWS and Microsoft using new powers given to the regulator by the Digital Markets, Competition and Consumers Act (DMCCA.)
“Our view is that competition in this market is not working as well as it could be,” said Meek, who went on to outline the opportunities missed by the sector as a result. “Effective competition in the delivery of these vital services could drive choice, quality and competitive prices – not only helping UK businesses but boosting innovation, productivity, growth and investment across the UK economy.”
CMA cloud investigation finds competition “not what it could be”
The CMA inquiry group detailed several concerns about competition in the UK cloud marketplace, beginning with the limited number of providers in the sector. AWS and Microsoft currently dominate the industry with an 80% combined market share, with Google running a distant third. Not only have cloud customers been deprived of choice, said the CMA, but commercial and technical barriers have made it difficult for them to switch even between these providers, locking them into choices “which may not reflect their evolving business needs.”
The regulator added that the barrier to entry into the UK marketplace for new providers was disproportionately high given the immense capital investment required to set up server farms large enough to compete with the big three. The CMA also singled out Microsoft for attempting to use “its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud.”
Consequently, the inquiry group has recommended that the CMA use new powers allocated to it under the DMCCA to consider designating AWS and Microsoft as having “strategic market status” (SMS) – a label that would allow the regulator to impose restraints on both firms to revitalise competition in the sector. These could include technical standardisation, reduced data transfer charges or licensing changes, the regulator added.
Reactions to the CMA cloud investigation
The CMA’s findings were cautiously welcomed by Mark Boost, founder and chief executive of cloud services provider Civo, who said that it was self-evident that hyperscalers had distorted competition in the UK marketplace. “That the CMA has recognised this view is heartening, but the job’s far from done,” said Boost. “We still have to await the final outcome due in August, and recent personnel changes in the CMA’s leadership may mean the organisation ultimately takes a different path.”
AWS, meanwhile, published a robust defence of its conduct in the UK cloud market. “The proposed intervention under the [DMCCA] is not warranted,” said a company spokesperson. “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 CMA’s investigation into the UK cloud services market follows a formal recommendation to investigate from fellow regulator Ofcom, which also concluded in October 2023 that competition in the sector was deficient. Similar probes into alleged anti-competitive practices have also been mounted by regulators in Europe and North America, with at least one competition complaint in the former jurisdiction being settled for €20m between Microsoft and industry body CISPE.
Read more: Have the hyperscalers broken the UK cloud market?
