The Competition and Markets Authority (CMA) will investigate the £7.5bn cloud market in response to Ofcom’s concerns.
The investigation will address the supply of public cloud infrastructure services in the UK.
The CMA will look at the market dominance of cloud ‘hyperscalers’, namely Amazon Web Services (AWS) and Microsoft’s Azure, which together hold approximately 60 to 70 per cent of the cloud services market share. Google is their closest competitor with a share of somewhere between 5 and 10 per cent.
“Many businesses now completely rely on cloud services, making effective competition in this market essential,” said CMA chief executive Sarah Cardell. “The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and, if not, what action should be taken to address any issues it finds.”
The watchdog’s probe follows Ofcom’s market study, in which the regulator identified a number of features in the supply of cloud services that make it more difficult for customers to use multiple cloud suppliers.
In the study, Ofcom said it was “particularly concerned about the position of the market leaders Amazon and Microsoft”.
Moreover, Ofcom expressed particular concerns about several practices, including discounts, technical barriers to switching providers and egress fees, which customers must pay to move their data out of the cloud.
The regulator pointed out that there are “indications this is already causing harm”, but indicated that the CMA would be best placed to investigate this further.
“The CMA will now conduct an independent investigation to decide whether there is an adverse effect on competition, and if so, whether it should take action or recommend others to take action,” it added.
Microsoft responded by stating that the company “will engage constructively with the CMA”.
Amazon also agreed to work with authorities but warned that Ofcom’s findings were based on “a fundamental misconception of how the IT sector functions, and the services and discounts on offer”.
The e-commerce giant also stressed that “any unwarranted intervention could lead to unintended harm to IT customers and competition”.
Ofcom launched its probe into the cloud market in October 2022, under the Enterprise Act 2002. It said it would take feedback on its findings until mid-May and would then make its final decision later this year, on October 5.
The review is said to be part of a broader digital strategy push by Ofcom. The watchdog is also set to launch an investigation into encrypted messaging services such as WhatsApp, FaceTime and Zoom, as well as smart speakers and connected televisions.
The CMA investigation is expected to conclude by April 2025.
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