The UK's Competition and Markets Authority (CMA) has launched an investigation into the £7.5 billion ($9.11bn) cloud computing market.

Competition and Markets Authority
– Competition and Markets Authority

The investigation has kicked off following a recommendation from Ofcom, the UK's communications regulator, in April 2023.

The Ofcom referral was motivated by concerns that the Amazon Web Services (AWS) and Microsoft Azure duopoly might be limiting competition in the market.

The regulator identified several features that make it difficult for customers to switch and use multiple cloud suppliers including egress fees, cloud repatriation fees, and discounts to incentivize customers to use only one provider.

The CMA has appointed independent panel members to an inquiry group to conduct the investigation.

“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential," said Sarah Cardell, CEO of the CMA.

“Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

“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 Ofcom investigation found that AWS and Microsoft have a combined share of 70 to 80 percent of Britain's public cloud market in 2022, while Google is the closest competitor with five to 10 percent.

AWS has disputed Ofcom's findings, arguing that they are based on "a fundamental misconception of how the IT sector functions, and the services and discounts on offer.

"Any unwarranted intervention could lead to unintended harm to IT customers and competition," a spokesperson said.

In 2022, Microsoft was the target of an antitrust campaign, led by OVHcloud and backed by cloud trade association CISPE which includes Amazon. A complaint was filed with the European Competition watchdog. In May 2022, Microsoft agreed to adjust the terms of its cloud computing service to avoid a full antitrust investigation.

In June 2023, Google accused Microsoft and Oracle of anti-competitive practices in a letter to the Federal Trade Commission. At the same time, Oracle accused AWS of similar practices.