Britain’s Competition and Markets Authority (CMA) on Thursday expressed concerns that Microsoft and Amazon are harming competition in the cloud computing sector. The regulator called for an investigation under the country’s strict new tech laws into the dominant positions held by both firms.
Market Power and Lock-In Effects Raise Concerns
The CMA stated that high market concentration and barriers to entry in cloud services have given Microsoft and Amazon “significant unilateral market power.” This dominance has allowed them to earn returns exceeding their capital costs over an extended period.
The watchdog highlighted problematic practices such as egress fees and restrictive licensing agreements that create a “lock-in” effect, trapping businesses in contracts that are difficult to exit.
Microsoft responded by saying the CMA’s findings “miss the mark,” pointing to the dynamic and competitive nature of the cloud market, which is rapidly evolving through AI-driven innovations. The company also criticized the regulator for not including Google in its recommendations, despite Google being a fast-growing cloud competitor.
Amazon disputed the CMA’s conclusions, calling a new investigation “unwarranted” and warning it could isolate the UK internationally at a time when regulatory certainty is crucial for business competitiveness.
In contrast, Google welcomed the CMA’s actions, calling them a “watershed moment” that will help ensure fair pricing, choice, innovation, and economic growth in the UK.
Licensing Practices and Market Shares Under Scrutiny
The CMA also raised concerns about Microsoft’s licensing strategy, which makes it cheaper to use Windows Server on Microsoft’s Azure cloud compared to competitors. This, the regulator said, limits the attractiveness and choice of alternative cloud services.
According to the CMA, Microsoft and Amazon each control roughly 30% to 40% of the infrastructure-as-a-service (IaaS) market, which includes essential computing resources like processing and storage. Google holds a smaller 5% to 10% share.
The CMA has recommended a formal probe under the Digital Markets, Competition and Consumers (DMCC) Act to assess whether Microsoft and Amazon qualify as “strategic market status” firms. This designation would subject them to targeted regulatory interventions.
The DMCC Act, recently introduced in the UK, is designed to prevent anti-competitive practices in digital markets, similar to the EU’s Digital Markets Act.
What The Author Thinks
The CMA’s focus on Microsoft and Amazon highlights growing global scrutiny of tech giants’ control over critical digital infrastructure. While ensuring fair competition is essential, regulators must strike a balance to avoid stifling innovation or creating barriers for companies trying to expand. The cloud market is rapidly evolving, and overly stringent rules could unintentionally slow technological progress that benefits businesses and consumers alike.
Featured image credit: Andy Hay via Flickr
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