The cloud computing market is not working effectively and Britain’s antitrust watchdog should use new powers to investigate market leaders Amazon and Microsoft, with a focus on the latter’s licensing practices, the watchdog’s inquiry group said.
Britain’s Competition and Markets Authority (CMA) has been investigating a market dominated by Amazon’s AWS (AMZN.O), opens new tab, Microsoft’s (MSFT.O), opens new tab Azure and, to a lesser extent, Google Cloud Platform since 2023.
Its independent inquiry group said on Tuesday a lack of effective competition in a sector worth 9 billion pounds ($11 billion) in 2023 was likely leading to higher costs, less choice and lower quality services.
It said technical and commercial barriers made it difficult for businesses to switch.
In provisional findings, the inquiry group also said Microsoft was using its dominance in enterprise software, such as Windows Server and Microsoft 365, to limit competition by charging licensing fees when its services were used on to rival platforms.
The price that Microsoft charged rivals for some products could be higher than the retail price it charged its own customers, the inquiry group said.
“Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud,” the group said, as it proposed investigating AWS and Microsoft using the CMA’s new powers, opens new tab.
The two companies each have about 40% of the market, it said.
Microsoft said the CMA “should be focused on paving the way for the UK’s AI-powered future, not fixating on legacy products launched in the last century”.
“The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation,” said deputy general counsel Rima Alaily in a statement.
Amazon said the proposed intervention was not warranted.
“The evidence demonstrates the IT services industry is highly competitive,” an AWS spokesperson said.
“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.”
Google, however, said it would work with the CMA to support openness in the market.
“Restrictive licensing harms UK cloud customers, threatens economic growth, and stifles innovation, and we are encouraged that the CMA has recognised the harm of these practices,” said Chris Lindsay, Google Cloud’s VP for customer engineering EMEA.
The CMA gained new powers to target big tech this month.
But the appointment of Amazon’s former UK boss Doug Gurr as its new interim chair last week by the government signalled a potential change in approach.
Microsoft is already facing a legal claim in Britain over its cloud licensing policies, and the United States Federal Trade Commission is also looking into the issue.
The CMA’s inquiry group said it would consult on its provisional findings before making a final decision by Aug. 4.