Microsoft and Amazon face a UK antitrust probe over cloud services

and are facing more antitrust scrutiny. The UK’s Competition and Markets Authority () says it will investigate the cloud services market in the country to determine if companies are engaging in anti-competitive practices.

Amazon (through ) and Microsoft are by far the biggest players in that field in the UK. Between them, they had a market share of between 70 and 80 percent last year, according to a report from media regulator Ofcom, which asked the CMA to investigate the market. Google is in third place with a relatively paltry share of between five and 10 percent.

Ofcom believes that competition in the market is constrained by a number of factors that make it hard for customers to switch suppliers or use more than one at the same time. A key issue is egress fees, which customers often have to pay to transfer their data to another service. “The cost of transferring data between rival providers can discourage customers from using more than one cloud provider and in some cases make switching more costly,” Ofcom .

A lack of interoperability and portability can make it overly laborious for customers to configure their data and apps to work on different services, the regulator said. Discounts can also dissuade customers from using more than one provider.

Those factors give Microsoft and Amazon a leg up over the competition, Ofcom suggests. “Limits on the ability of customers to credibly threaten to switch away can reduce the competitive pressure on the market leaders, giving them a degree of market power,” the report states. “If customers have difficulty switching and using multiple providers, it could make it harder for competitors to gain scale and challenge AWS and Microsoft effectively for the business of new and existing customers.”

In addition, Ofcom notes that some cloud service providers have raised concerns over the business software licensing practices of some cloud players, especially Microsoft. “We have received submissions that say Microsoft engages in several practices that make it less attractive for customers to use Microsoft’s licensed software products on the cloud infrastructure of rival providers compared to Microsoft Azure,” the report states. “The submissions allege that this limits their ability to compete for customers.” The products in question include Windows and Microsoft 365. Ofcom says that Microsoft has disputed the veracity of these claims.

“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny,” CMA CEO Sarah Cardell . “This is a £7.5 billion [$9.1 billion] market that underpins a whole host of online services — from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.” The CMA plans to conclude its investigation by April 2025.

Microsoft and Amazon both say they’ll work constructively with the CMA. Amazon took issue with Ofcom’s claims, telling  that the watchdog’s conclusions were rooted in “a fundamental misconception of how the IT sector functions, and the services and discounts on offer.”

The cloud has been a sticking point in another Microsoft-CMA tussle. The watchdog the company’s due to concerns that Microsoft would hold too much power in the cloud gaming market. Microsoft later pledged to to Activision Blizzard titles to Ubisoft if the deal goes through. That concession, made as part of Microsoft’s revised agreement, “opens the door to the deal being cleared,” . The regulator will make its final decision on the merger this month.