The UK Competition and Markets Authority (CMA) has published the provisional decision in its cloud services market investigation. It provisionally recommends that the cloud service activities of the two largest players, Amazon Web Services and Microsoft, should be investigated using the CMA's new powers to regulate Big Tech under the UK's Digital Markets, Competition and Consumers Act.
Cloud services: What's the CMA's provisional verdict and why does it matter?
Overview
Why is the CMA recommending intervention?
As explained in our earlier briefing, the CMA is concerned that competition in the market for cloud services is not working as well as it could be. Its key provisional conclusions are as follows:
- both Amazon Web Services and Microsoft have significant market power, making it harder for alternative suppliers to enter the market or win customers and reducing customers' choice of providers; and
- Microsoft is using its strong position in relation to certain Windows software to make it difficult for customers to switch to alternative providers, notably Google and Amazon Web Services.
Although the CMA could have recommended imposing remedies using its market investigation powers, it is provisionally recommending that it should use its powers under the Digital Markets, Competition and Consumers Act 2024 (DMCC Act) to designate Microsoft and Amazon Web Services as having "Strategic Market Status" (SMS). Again, this is explained in more detail in our earlier briefing, where we anticipated that this was what the CMA might decide.
What happens next?
The CMA will consult on the provisional decision and is expected to make a final decision before 4 August 2025. However, it is possible that it could open an SMS investigation in advance of that, as it did with its Mobile Browsers SMS investigation (where the final report in the market investigation is not due until end of March but the SMS investigation has already started).
What does this mean for cloud customers?
At present, there is typically very little room for significant negotiation of the terms offered by cloud service providers. If the CMA proceeds to designate the cloud activities of Microsoft and Amazon Web Services under the DMCC Act, it will then be in a position to regulate those activities – for example, by imposing conduct requirements to make it easier to switch to other, competing cloud services firms. This may be welcomed by customers and could lead to lower fees (the CMA estimates that if competition in the market were more effective, customers could save over £400 million per year). However, such requirements could only be put in place once the CMA has designated Microsoft and Amazon Web Services as having SMS status – which (assuming an SMS investigation is ultimately opened) may not happen until later this year or even 2026. This means that CMA intervention may come too late to make much difference to customers looking to renegotiate their cloud arrangements in the next 6-12 months. That said, the mere fact that cloud service are coming under increased scrutiny from the CMA may give customers slightly more leverage than they would normally have. Customers looking at a longer timescale for expiry/renewal of current arrangements should keep a careful eye on developments, as intervention by the CMA may help them get a better deal.
What are the wider implications?
Competition Associate Laura Reuther commented:
If this becomes the CMA's third 'strategic market status' investigation, it creates a real opportunity for the CMA to forge its own path given no firms have thus far been designated as cloud gatekeepers under the EU's Digital Markets Act. It may also impact the CMA's pipeline of SMS investigations under the UK Digital Markets, Competition and Consumers Act; for example, if an SMS investigation into cloud services is actually opened, it could mean messaging/social media platforms are left to a later round of SMS investigations.
