Amazon and Microsoft ‘should face probe over cloud service competition concerns’
An independent inquiry report has told the UK’s competition watchdog to consider investigating AWS and Microsoft’s cloud services.
The UK’s competition regulator should consider investigating Amazon and Microsoft’s cloud services under new digital markets rules, an independent inquiry group has said.
Publishing its provisional findings on an investigation into the cloud services market in the UK, the group said competition in the £9 billion sector was not working as well as it could be.
This could be leading to higher costs, less choice and innovation and a lower quality of services for businesses across the UK – in a sector dominated by Amazon’s AWS and Microsoft, who each have around a 40% share of consumer spend in the market.
In its report, the inquiry group said Microsoft in particular was using its strong position in software to make it harder for AWS and Google – the third largest player in the market – to compete effectively for cloud customers that wish to use Microsoft software on the cloud.
This is reducing the competitive challenge that AWS and Google can provide to Microsoft’s position in the cloud market, the report said.
It also said there were technical and commercial barriers that made it difficult for users to switch between different cloud providers, which was locking them into initial choices.
As a result of these concerns, the inquiry group said it was recommending the Competition and Markets Authority (CMA) use its powers under the Digital Markets, Competition and Consumers Act (DMCCA) to investigate, and consider whether AWS and Microsoft should be designated with strategic market status.
Former Amazon UK boss Doug Gurr was announced as the new chair of the CMA last week.
Under the new rules, firms which are designated are required to follow special measures or interventions which are designed to boost competition.
Kip Meek, chair of the CMA’s independent inquiry group, said: “Cloud services underpin most business operations, providing vital infrastructure to businesses and organisations across the UK economy.
“Our provisional view is that competition in this market is not working as well as it could be. So, we propose that the CMA considers investigating the largest cloud service providers using its new digital markets powers.
“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.”
In a statement, an AWS spokesperson said: “The proposed intervention under the Digital Markets, Competition and Consumers Act is not warranted.
“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.
“We welcome the CMA’s updated finding that customer discounts do not harm competition. But we urge the CMA to carefully consider how regulatory intervention in other areas will stifle innovation and ultimately harm customers in the UK. We will continue to work constructively with the CMA as they work on their final report.”
Rima Alaily, corporate vice president and deputy general counsel competition law group at Microsoft, said: “The 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?”
