UK Antitrust Regulator Targets Microsoft Over Cloud Services Dominance

The UK’s Competition and Markets Authority (CMA) has raised concerns about Microsoft’s dominant position in the £9bn UK cloud services market, alleging that the tech giant’s influence is stifling competition and innovation, according to The Financial Times. The watchdog’s findings highlight a range of issues in the sector, including higher costs and reduced choice for businesses.

In a provisional decision announced Tuesday, an independent panel advising the CMA stated that competition in the cloud services sector is “not working.” The panel identified Microsoft’s practices as a significant barrier for competitors like Amazon Web Services (AWS) and Google, particularly for customers seeking to use Microsoft software on cloud platforms.

“Microsoft is using its strong position in software to make it harder for Amazon Web Services and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud,” the panel reported.

Calls for Stronger Oversight

The panel recommended that the CMA leverage its new powers under the recently enacted digital markets regime to assess whether Microsoft and Amazon should be classified as holding “strategic market status.” This designation would allow the regulator to impose specific conduct requirements aimed at enhancing competition.

These new regulations, which came into effect this month, empower the CMA to identify companies with outsized influence in critical markets and enforce measures to curb anti-competitive behavior. The CMA’s scrutiny of cloud services comes amidst increased pressure from the UK government to foster economic growth and attract business investment, The Financial Times noted.

The regulator’s efforts follow a broader investigation into cloud services that began with a market study by Ofcom in October 2022. Ofcom later referred the matter to the CMA, which has been examining the issue for over two years.

The CMA’s inquiry group observed that limited competition in the sector restricts businesses’ ability to switch providers or adopt multi-cloud strategies, which could lead to higher prices and lower-quality services.

Related: CMA Chief Removed as UK Government Targets Regulatory Overhaul

Industry Giants Push Back

Amazon and Microsoft, which collectively account for as much as 80% of UK cloud services spending, have pushed back against the CMA’s findings. AWS argued that the proposed regulatory measures are unnecessary and could hinder innovation.

“The evidence demonstrates the IT services industry is highly competitive,” AWS stated. “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.”

Microsoft echoed similar sentiments, with Rima Alaily, the company’s deputy general counsel, asserting that the investigation is overly focused on older products rather than looking toward the future of AI-driven technology. “The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation,” Alaily said.

Leadership Changes at the CMA

The CMA’s efforts come at a time of significant leadership changes. Last week, CMA chair Marcus Bokkerink was unexpectedly removed by business secretary Jonathan Reynolds and replaced by Doug Gurr, a former head of Amazon UK. Writing in The Financial Times, Gurr emphasized the importance of accelerating investigations and increasing sector-specific expertise to attract investment and reduce inefficiencies for businesses.

Source: The Financial Times