Cloud giants are found to be harming UK competition - but no sense of urgency from the CMA
After a two year investigation into the health of the UK cloud computing market, the CMA has re-confirmed its provisional findings from January that “competition is not working as well as it could”. The CMA’s report has found that Microsoft and Amazon Web Services (AWS) are stifling competition in the UK’s £10.5 billion cloud computing market. It says that Microsoft and AWS hold a “significant” share of UK customer spending - up to 70% combined. And they are using their dominance to gouge UK cloud customers by pushing up prices and entrenching barriers that make it painfully hard for customers to switch providers. This has stifled the competitive dynamics that typically drive innovation and fair pricing. This translates into real costs: the CMA estimates that UK customers, especially smaller businesses and public sector providers, may be overpaying by £500 million a year due to a lack of competition.
While the report criticises both Microsoft and AWS, it singles out Microsoft accusing it of inflating prices to make its office software less appealing when run on rival cloud platforms. It was also found to have used restrictive licensing to make some practices unavailable to customers on other platforms. while stopping them from taking their existing Microsoft licenses to AWS or Google.
However, the CMA’s report stops short of imposing immediate remedies, instead recommending that the CMA Board approve a further investigation of Microsoft and AWS under the new Digital Markets, Competition and Competition Act, to designate them as having “Strategic Market Status” in order to introduce targeted and binding obligations, including forced changes to pricing, contractual terms and business practices, to tackle the multiple concerns it found. But this won’t happen anytime soon as Board approval for an investigation into potential designation under the new Act won’t happen until early 2026 and then it would be likely another 12-18 months until any meaningful intervention.
While it is encouraging that the CMA has confirmed its view in its report that the UK cloud market is too concentrated, the decision to defer enforcement is underwhelming and ignores the urgency that the market needs. The whole process began in 2022 with an OFCOM review that was handed over to the CMA in 2023. Waiting until 2026 to maybe do something not only falls short in terms of a meaningful regulatory response, but means it will be business as usual for these hyperscalers who will also continue to rake in billions from government contracts to run public infrastructure projects that the public depends on.
The CMA Board must not delay and should make full use of the powers promised by the new Digital Markets regime to hold monopoly powers in the digital infrastructure space to account and ensure that the UK cloud market is open, diverse and resilient.