It appears that Microsoft and Amazon are making it impossible for UK clients to use several providers of essential cloud services, which might land them in hot water.
The UK's antitrust watchdog, the Competition and Markets Authority (CMA), said on Thursday that it was beginning an inquiry into the market for cloud infrastructure services to ascertain if participants were engaging in anti-competitive behavior.
Companies that offer cloud computing, like Microsoft and Amazon Web Services (AWS), employ data centers all around the world to offer remote access to computing and storage services. This "cloud infrastructure" serves as the basis for the creation and operation of software programs like Gmail and Dropbox.
The CMA investigation was started in response to a study by Britain's media and communications regulator, Ofcom, which determined that the UK's supply of cloud infrastructure is extremely consolidated and that there is little room for competition.
In a statement, CMA CEO Sarah Cardell stated, "We welcome Ofcom's referral of public cloud infrastructure services to us for in-depth scrutiny."
This £7.5 billion business supports a wide range of internet services, including social media and the foundational models for artificial intelligence. Cloud services are being used exclusively by many companies, necessitating strong market rivalry.
The investigation is the most recent example of the growing attention large internet companies are facing from European authorities, who have recently tightened regulations in areas like data protection and targeted advertising.
One of the most extensive and ambitious attempts by politicians to control digital firms is reflected in the European Digital Services Act, which went into effect at the end of August. Amazon (AMZN), Apple (AAPL), Google (GOOG), Microsoft (MSFT), Snapchat, TikTok, and Meta (META), the owners of Facebook and Instagram, are among the businesses that are affected.
Microsoft and AWS had a combined market share of 70–80% in the UK market for cloud infrastructure services last year, according to Ofcom. Google, which has a 5–10% market share, is their main rival.
In its research, Ofcom highlighted market characteristics, such as switching costs, that make it more challenging for customers to move providers or utilize several providers.
According to a statement from Ofcom, it may be more difficult for rivals to grow and successfully compete with AWS and Microsoft for both new and existing customers' business if customers find it difficult to move between and use different providers.
The research also expressed worry about Microsoft's and other cloud providers' software licensing policies.
Microsoft and Amazon both pledged to communicate with the CMA in a "constructive" manner.
AWS noted that it disagreed with Ofcom's conclusions nevertheless, in a statement. The representative stated, "We... believe they are based on a fundamental misconception of the services and discounts offered, as well as how the IT sector functions," adding that "the cloud has made switching between providers easier than ever."
A Microsoft representative continued, saying, "We are committed to ensuring the UK cloud industry remains innovative, highly competitive, and an accelerator for growth across the economy."