Amazon and Microsoft in cloud computing competition probe

Amazon and Microsoft will be investigated as part of a competition probe into the UK’s £7.5billion cloud computing sector.

The Competition and Markets Authority (CMA) is to look into the industry after a referral from communications regulator Ofcom. 

It puts Microsoft back in the crosshairs of the regulator following its battle with the US tech giant over its takeover of Call of Duty video game maker Activision Blizzard.

Cloud computing allows users to store and access data online and is an essential tool for businesses and individuals.

Ofcom’s initial probe found customers face charges and technical barriers to switching providers. It singled out Microsoft and Amazon Web Services (AWS) as the two dominant players.

They have a combined market share of 70 per cent to 80 per cent, and Google is their closest competitor with a share of up to 10 per cent.

Ofcom director Fergal Farragher said: ‘Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well.’

The CMA will assess whether there are features in the market that could stifle competition, which reduces choice and can push up prices for consumers.

It can force firms to sell parts of their business to improve competition. Its independent panel will investigate and report their findings by April 2025.

CMA chief executive Sarah Cardell (pictured) said: ‘This is a £7.5billion market that underpins a whole host of online services, from social media to AI foundation models.

‘Many businesses completely rely on cloud services, making effective competition essential. 

Strong competition ens-ures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.’

Ofcom is concerned about fees customers must pay to transfer data out of a cloud, which can discourage consumers from using more than one provider.

It found there are technical barriers to switching as customers must put in extra effort into reconfiguring data and applications to work on different clouds. 

The regulator’s report said discounts can benefit consumers, but also incentivise them to use a single cloud provider.

Amazon said it will work with CMA investigators but disagrees with Ofcom’s findings.

‘They are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer’ an AWS spokesman said.

Microsoft said it will co-operate, saying: ‘We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy’.

This year, the CMA blocked Microsoft’s £60billion takeover of Activision, only allowing it after Microsoft changed its proposal.