Microsoft and Amazon face UK regulator investigation over cloud services

Microsoft and Amazon face UK regulator investigation over cloud services

The clouds are gathering over Microsoft’s Azure operations in the EU and now the UK, with the launch of a new investigation into major cloud service providers that also includes Amazon. The UK’s Competition and Markets Authority (CMA) is just about to wrap up its concerns over cloud gaming with Microsoft’s proposed Activision Blizzard acquisition, but it will soon turn its attention to Microsoft’s Azure cloud offerings and Amazon Web Services (AWS).

It’s part of a fresh investigation into public cloud providers in the UK, after telecoms regulator Ofcom “identified a number of features in the supply of cloud services that make it more difficult for customers to switch and use multiple cloud suppliers.”

Ofcom found issues with charges that cloud customers have to pay to move their data out of the cloud, discounts to only use one cloud provider, and technical barriers to switching between cloud providers. The CMA specifically calls out Microsoft, too. “Ofcom’s report also outlines concerns it has heard about the software licensing practices of some cloud providers, in particular Microsoft,” says the CMA in its press release today.

Telecoms regulator Ofcom found issues with cloud services in the UK

“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,” says Sarah Cardell, CEO of the CMA.

Although the CMA doesn’t specifically name Amazon, Ofcom’s market study identified that both Microsoft and Amazon control around 70-80 percent of the public cloud infrastructure in the UK and that it was “particularly concerned about the practices of Amazon Web Services (AWS) and Microsoft because of their market position.”

Ofcom and the CMA aren’t alone in their concerns over cloud market competition, either. The Cloud Infrastructure Services Providers in Europe (CISPE) trade group, which includes Amazon, filed an antitrust complaint with the EU last year. The group argues “Microsoft uses its dominance in productivity software to direct European customers to its own Azure cloud infrastructure to the detriment of European cloud infrastructure providers and users of IT services.”

Microsoft offered some licensing concessions more than a year ago, but they haven’t been enough to address the ongoing complaints. Google even publicly called out Microsoft’s cloud software licensing “tax” earlier this year, arguing that businesses have to pay extra when they want to run software like Office on other cloud networks.

“Microsoft publicly touts that if you run their software on Azure versus other vendors like AWS and GCP, it’s five times cheaper or it’s more expensive to run on us, basically because of the tax customers have to pay to Microsoft,” said Amit Zavery, head of platform at Google Cloud, in an interview with The Register earlier this year. “The price of the products are the same in terms of infrastructure and everything else, so the licensing cost is more expensive because of using providers other than Azure.”

The CMA’s market investigation could take 18 months to complete, with a statutory deadline set for April 4th, 2025. The UK regulator will outline theories of harm and any potential remedies that might address the situation. The UK regulator also has the power to “impose structural remedies which can require companies to sell parts of their business to improve competition.”

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