UK CMA accuses Microsoft and Amazon of stifling cloud competition

Calls for deeper probe under new tech law

The Competition and Markets Authority (CMA) issued its final report Thursday following a nearly three-year-long investigation that began with a review by Ofcom and was handed over to the CMA in October 2023.

The findings conclude that Microsoft and Amazon hold "significant unilateral market power" in the UK's cloud infrastructure services market – a dominance that the regulator says has led to financial returns far outpacing their capital investments.

According to the report [pdf], Microsoft Azure and Amazon Web Services (AWS) each control 30% to 40% of UK customer spending in the infrastructure-as-a-service (IaaS) market, a segment that includes processing, storage, and networking via remote datacentres.

Google, the third-largest provider, lags significantly behind, with just 5% to 10% of the market. The CMA said that the market has become highly concentrated, with barriers to entry and limited customer mobility, stemming from restrictive licensing practices and technical hurdles that discourage switching providers.

These include egress fees (charges for moving data out of cloud platforms), as well as commercial restrictions that create a "lock-in" effect, making it costly or impractical for customers to migrate to alternative providers.

While the report criticised both Microsoft and Amazon, it singled out Microsoft for exacerbating the problem by charging rival cloud firms extra to run its software.

The CMA said this practice adversely impacts competitiveness and makes alternatives to Azure less attractive to customers.

Moreover, the regulator found that Microsoft's licensing model incentivises customers to stay within its ecosystem, noting that it is often cheaper to run Microsoft's cloud-based Windows Server software on Azure than on rival platforms.

This, the CMA argues, "further restricts the already limited choice and attractiveness of alternative products and suppliers."

The findings come amid booming profits in the cloud sector. Microsoft reported a 34% surge in global cloud revenue, reaching a record $75 billion in the year to June, driven largely by Azure's growth.

In response to the CMA's report, Microsoft issued a strong rebuttal, claiming the regulator has "missed the mark again."

"The cloud market has never been so dynamic and competitive, with record investment and rapid, AI-driven changes," a Microsoft spokesperson said.

"Its recommendations fail to cover Google, one of the fastest-growing cloud market participants."

Amazon also pushed back, stating that the call for a new investigation is "unwarranted" and warning that it could harm the UK's position as a global tech hub.

"It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness. We will continue to engage constructively with the CMA as they consider their next steps," an Amazon spokesperson said.

Google, however, welcomed the CMA's action, calling it a "watershed moment" for the UK's digital economy.

"Swift action from the DMU is essential to ensure British businesses pay a fair price and to unleash choice, innovation and economic growth in the UK," said Chris Lindsay, vice president customer engineering EMEA at Google Cloud.

The CMA is now recommending that Microsoft and Amazon be investigated further under the DMCC Act, a landmark piece of legislation that gives regulators sweeping powers to rein in anti-competitive behaviour in digital markets.

Companies found to have "strategic market status" under the DMCC can face binding obligations aimed at fostering competition, including forced changes to pricing, contractual terms, and business practices.

Reacting to the CMA's decision, Mark Boost, CEO of London-based cloud firm Civo, said the regulator's actions fall short, warning that for hyperscale providers it's likely to remain "business as usual."

"This feels like a repeat of the provisional decision, but only with softer edges. The CMA has identified the same issues but failed to follow through with the urgency that the market needs,” said Boost.

"The recommendation to refer AWS and Microsoft to the Digital Markets Unit (DMU) sounds strong, but without interim remedies or a clear timeline, it leaves dominant providers free to continue business as usual.”

Nicky Stewart, senior advisor to the Open Cloud Coalition, said: "We urge the CMA to move forward at pace and start its Digital Markets investigation into Microsoft and AWS immediately, implementing remedies to halt the most egregious unfair practices at the outset."

"Given the alarming anti-competitive behaviour it has identified, the current plan to start this process in early 2026 is nowhere near sufficient. The UK is falling further behind on its digital ambitions around growth and resilience every day we wait.