The Competition and Markets Authority (CMA) convened a panel to investigate the cloud services market in the UK. The panel has now recommended that the CMA use its digital markets powers to prioritize an investigation into the largest cloud providers, Microsoft and Amazon Web Services, regarding their practices.
The panel"s final decision highlighted three main issues. First, the UK cloud market is dominated by AWS and Microsoft, creating high barriers for new entrants to enter or grow. This situation gives Microsoft and Amazon significant market power and leaves customers with limited choice.
Second, technical and commercial barriers make it difficult for customers to switch cloud providers. This "lock-in" prevents them from taking advantage of better offers or more innovative services, which in turn weakens competition.
Third, Microsoft"s software licensing strategies are specifically highlighted as anti-competitive. They are designed to disadvantage rivals like AWS and Google, further restricting choice for customers who rely on Microsoft software.
Here"s an excerpt from the CMA"s report which describes Microsoft"s licensing practices:
We found significant differences relating to price and/or quality when customers use these software products on Microsoft’s cloud rather than AWS’ or Google’s. For example, the input price paid to Microsoft by AWS and Google for some of these products can be higher than Microsoft’s customer-facing price for some cloud customers. AWS and Google pass through at least some of the input costs of Microsoft software, and customers generally perceive them to be more expensive than Microsoft.
A Microsoft spokesperson shared the following statement with the Financial Times in response to the CMA report: "The CMA panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment, and rapid, AI-driven changes. Also, the recommendations fail to cover Google, one of the fastest-growing cloud market participants."
The potential investigation could eventually result in major changes to Microsoft’s cloud software licensing and pricing. However, the legal process is expected to be lengthy, potentially taking years, by which time the issues in question may no longer be relevant.