Government regulatory body advocates for limiting Microsoft and Amazon Web Services by assigning them 'strategic market' status
UK Competition Regulator to Impose Tailored Interventions on Microsoft and Amazon Web Services
The UK's Competition and Markets Authority (CMA) has announced plans to impose targeted and bespoke interventions on Microsoft and Amazon Web Services (AWS) following their likely designation with Strategic Market Status (SMS) in the UK cloud infrastructure services market.
The designation, enabled by the Digital Markets, Competition and Consumers Act 2024, would grant the CMA the power to address competitive harms identified during its investigation by imposing specific remedies tailored to curb anti-competitive behaviors by these dominant cloud providers.
The potential actions include introducing targeted remedies to restore competition, focusing on behaviors that the CMA concluded harm the UK cloud market, such as pricing practices and market power abuses. The CMA may also use new regulatory powers to impose conduct requirements on Microsoft and AWS as SMS-designated suppliers, which could involve structural or behavioural measures to rebalance the market.
Ongoing monitoring of how these companies operate in the marketplace is also expected, given their significant market shares (30-40% each in the UK cloud market as of 2024) and their ability to sustain returns above their cost of capital. The CMA board is expected to consider formally designating them with SMS in early 2026, after which these interventions would be implemented.
The underlying goal of these potential actions is to remedy the harms to competition that the CMA’s final report has identified, such as Microsoft’s charging of Amazon and Google for use of its software driving up costs, and the overall market concentration limiting choices in public cloud infrastructure services.
The CMA’s approach appears focused on restoring competitive dynamics through bespoke regulatory measures rather than broad structural breaks at this stage.
Similar concerns have been raised by the US Federal Trade Commission with an ongoing antitrust investigation into Microsoft's cloud, AI, and infosec businesses. The EU is also paying close attention to these practices.
If the UK market was more competitive, one outcome would be better pricing, potentially saving UK businesses around £500 million ($661 million) per year for cloud services. Technical and commercial barriers to switching and multicloud give rise to adverse effects on competition in cloud services. The CMA has identified Microsoft's licensing practices as a concern, making it more expensive and troublesome for customers to run Microsoft software on rival cloud infrastructure.
The UK competition regulator has proposed to designate Microsoft and AWS with Strategic Market Status (SMS) due to their dominance in the cloud market. An SMS designation would allow the CMA to introduce targeted measures to tackle the concerns found.
In summary, following the upcoming SMS designation, Microsoft and AWS can expect the UK CMA to impose tailored regulatory interventions aimed at limiting their market power and fostering a more competitive cloud services landscape in the UK.
- To address competition concerns in the UK cloud market, the CMA might implement tailored measures, such as imposing conduct requirements on Microsoft and AWS, which could involve AI-driven remedies to curb their market power.
- The UK CMA's proposed interventions for Microsoft and AWS, including AI-focused measures, are aimed at promoting a cloud services landscape underpinned by software and technology that supports a more competitive market for UK businesses.
