The U.K.’s antitrust regulator will investigate the public cloud market to determine if leading industry players may be engaging in anticompetitive practices.

The Competition and Markets Authority, or CMA, announced the probe today. The move comes shortly after Ofcom, a U.K. regulator responsible for overseeing the local telecommunications and broadcast sectors, completed a study of the cloud market. It identified four industry practices that it believes may have a negative effect on customers.

Ofcom’s study placed a particular focus on Amazon Web Services Inc. and Microsoft Corp., the cloud market’s two largest players. The companies together accounted for over 60% of cloud spending last year. At the crux of the CMA’s newly launched investigation is the concern that AWS and Microsoft may be discouraging customers’ from switching to rival clouds.

“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny,” said CMA Chief Executive Officer Sarah Cardell. “This is a £7.5bn 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 first concern that Ofcom flagged in its market study is cloud providers’ practice of charging egress fees. Those are charges applied to data traffic that customers send from a cloud platform to external infrastructure. A company can, for example, incur egress costs when it moves workloads from a cloud platform to a competitor’s infrastructure.

Ofcom is concerned that the cost of moving workloads between clouds may be lowering companies’ incentive to use multiple providers. Some market players waive egress fees up to a certain bandwidth threshold. Past that threshold, however, egress fees can add up quickly for large enterprises with a lot of outgoing data traffic.

Another chapter in Ofcom’s market study was dedicated to so-called committed spend discounts. If a company commits in advance to spending a certain sum on a cloud platform, it can often receive a discount from the platform’s operator. That price cut sometimes amounts to a significant percentage of the deal’s total value.

Ofcom believes that committed spend discounts may provide an incentive for companies to use a single cloud provider and lower their use of competing platforms. The reason has to do with the way the discounts are structured. According to Ofcom, “an important feature of the discount structure is that the more a customer spends on the provider’s cloud services, the greater the discount received.”

The third focus of the regulator’s market study is the fact that moving applications between clouds often requires modifying them. Those changes are necessary because cloud platforms can vary greatly in their technical characteristics. According to Ofcom, the complexity of porting applications across clouds may be lowering customers’ incentive to use multiple providers. 

“Some of this complexity stems from technical differentiation between cloud providers, which can be the result of innovation which benefits customers,” Ofcom stated. “However, we are concerned that some of the barriers which arise from technical differentiation are not justified.” The regulator also expressed concerns that providers may not be fully transparent about the complexity of moving workloads from their infrastructure to rival platforms. 

The fourth potential issue flagged by Ofcom relates to Microsoft’s software licensing practices. Ahead of its market study’s publication, the regulator received complaints that claimed some Microsoft software products are more expensive to run on rival clouds than on its own Azure platform. Some complaints also alleged that certain product features are only available on Azure and security updates are more easily accessible.

The CMA has appointed an independent panel to manage its investigation of the cloud market. The regulator will complete the probe by April 4, 2025. It if identifies antitrust issues, the CMA can order industry players to change their business practices. 

“We disagree with Ofcom’s findings and believe they are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer,” Amazon said in a statement. “Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services.” 

AWS added that U.K. companies, and the overall economy, “benefit from robust competition among IT providers, and the cloud has made switching between providers easier than ever. Any unwarranted intervention could lead to unintended harm to IT customers and competition. AWS will work constructively with the CMA.”

Microsoft also responded to the announcement of the investigation today. “We are committed to ensuring the U.K. cloud industry remains innovative, highly competitive and an accelerator for growth across the economy,” the company stated. “We will engage constructively with the CMA as they conduct their Cloud Services Market Investigation.” 

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