Storms Ahead for MSFT and AMZN as U.K. Regulator Cracks Down on Cloud Dominance
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The Competition and Markets Authority (CMA) declared today that both companies held 'significant unilateral market power' in the sector.
Locked-In
As a result, the CMA is worried that this is creating a 'lock-in' effect where businesses are trapped into unfavorable contractual agreements. In short, they are unable, due to technical and commercial barriers, to switch cloud provider and find better offers or more innovative new services.
The CMA said it will investigate whether to designate the two with strategic market status (SMS) in cloud services, which would give it new powers to intervene.
Microsoft was singled out in the report for licensing practices that the panel said adversely impacted Amazon Web Services and Alphabet-owned Google (GOOGL).
The inquiry group said in January that Microsoft was using its dominance in enterprise software, such as Windows Server and Microsoft 365, to limit competition by charging licensing fees when its services were used on rival platforms.
As can be seen below, cloud revenue is a key part of Microsoft's overall business.
Microsoft and AWS has a 30 to 40% share of the IaaS (Infrastructure as a Service) market. Google is the third main cloud services provider, but it has a much smaller share.
However, both Microsoft and Amazon came out fighting.
Fighting Talk
Microsoft said the report 'misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment, and rapid, AI-driven changes.'
'Its recommendations fail to cover Google, one of the fastest-growing cloud market participants,' it said.
Amazon said: 'The action proposed by the Inquiry Group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses. It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness.'
But Google said the conclusive finding that restrictive licensing harmed cloud customers and competition was a 'watershed moment'.
Earlier this month, the CMA said it planned to designate Alphabet's Google and Apple (AAPL) with strategic market status for their dominant role in mobile ecosystems.
This is another example of enhanced regulatory crackdown on U.S. tech in the U.K. and Europe. However, it has done little to stop the growth in either Microsoft or Amazon's share price.
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