Tech giants respond after CMA raises concerns over alleged harmful cloud dominance by Microsoft and Amazon Web Services (AWS)
The UK's Competition and Markets Authority (CMA) has published the final findings of its 21-month cloud investigation, revealing that Microsoft and Amazon hold significant unilateral market power in the UK cloud infrastructure market. This dominance, the CMA argues, is harming competition and disadvantageing alternative providers.
The CMA's report highlights various practices that contribute to this competitive imbalance. For instance, Microsoft's software licensing model is criticised for encouraging customers to stay within its Azure ecosystem, making alternatives less attractive. Similarly, Amazon's dominant position is seen as limiting market choice.
The CMA's findings have far-reaching implications for the UK's digital economy. With the cloud infrastructure market becoming increasingly critical, customer spend rising nearly 30% year-on-year, the regulator's concerns are timely. The CMA warns of reduced competition, higher costs for some customers, and potentially slower innovation, which could hinder UK businesses' digital resilience and growth.
In response, the CMA is considering designating Microsoft and Amazon with "strategic market status" (SMS), a regulatory tool that would allow it to impose targeted interventions to remedy these competition harms. Such a move may enhance competitive dynamics in the cloud sector and benefit UK businesses by improving choice and potentially lowering costs.
However, both Microsoft and Amazon have strongly opposed the findings. Microsoft, for example, has criticised the CMA for excluding Google, another fast-growing cloud provider in the UK, from similar scrutiny. Amazon, on the other hand, has warned that heavy regulation could harm the UK's reputation as a global tech hub and affect business confidence.
Not everyone shares this view, though. Paul Mackay, VP of Cloud at software firm Cloudera, stated that the CMA's report is important given the increasing adoption of AI and concerns over data sovereignty in Europe. Mackay noted that the ruling could support the UK's ambition to lead in AI, as managing multiple models across different providers will become essential. He also suggested that businesses would welcome a more flexible multi-cloud model once barriers to service interoperability are removed.
The CMA expects that AI-powered services will play a greater role in cloud competition in the future. By ensuring a level playing field, the regulator aims to foster a competitive environment that encourages innovation and growth. However, the CMA acknowledges the need to balance intervention with the risk of regulatory overreach.
The CMA has recommended that the CMA board prioritise SMS designations for Microsoft and AWS in 2026, after completing ongoing probes into Google and Apple. This recommendation, if implemented, could signal a significant potential shift in how dominant cloud providers operate in the UK, aiming to foster better competition and improve conditions for UK businesses reliant on cloud infrastructure.
References:
[1] BBC News. (2022, June 7). UK watchdog calls for Amazon and Microsoft to face tighter cloud rules. https://www.bbc.co.uk/news/technology-61737987
[2] The Guardian. (2022, June 7). Microsoft and Amazon face tighter cloud rules in UK after watchdog report. https://www.theguardian.com/technology/2022/jun/07/microsoft-and-amazon-face-tighter-cloud-rules-in-uk-after-watchdog-report
[3] Sky News. (2022, June 7). UK cloud market 'dominated' by Amazon and Microsoft, watchdog warns. https://news.sky.com/story/uk-cloud-market-dominated-by-amazon-and-microsoft-watchdog-warns-12604003
[4] Reuters. (2022, June 7). UK watchdog recommends tighter cloud rules for Amazon, Microsoft. https://www.reuters.com/business/uk-watchdog-recommends-tighter-cloud-rules-amazon-microsoft-2022-06-07/
- The CMA's report, released following its 21-month investigation into cloud infrastructure markets, argues that the significant unilateral market power held by Microsoft and Amazon in these markets is detrimental to competition and may lead to increased costs and reduced innovation for businesses.
- In light of the rising importance of technology, such as data-and-cloud-computing, in today's economy, the CMA's potential designation of Microsoft and Amazon with "strategic market status" (SMS) could have far-reaching impacts, possibly enhancing competition dynamics in the cloud sector, improving choice for UK businesses, and potentially lowering costs.
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