UK Investigates Cloud After Ofcom Eyes Amazon, Microsoft Inc. and Microsoft Corp.’s cloud services face an investigation by the UK’s antitrust watchdog over concerns the US firms may be abusing their market power.

(Bloomberg) — Inc. and Microsoft Corp.’s cloud services face an investigation by the UK’s antitrust watchdog over concerns the US firms may be abusing their market power.

The Competition and Markets Authority said on Thursday it’s opening a market investigation into the supply of public cloud infrastructure in the UK. The probe follows a yearlong study from telecommunications regulator Ofcom which found evidence that major players such as Amazon and Microsoft made it hard for customers to use multiple suppliers or switch. The two companies provide increasingly essential remote storage and computing which has become more and more prevalent across business.

“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,” Fergal Farragher, the Ofcom director responsible for the study, said in a statement. Ofcom highlighted the fees paid when transferring data out of the cloud, a lack of interoperability, and discounting which might encourage staying with a single provider.

The CMA’s market investigations typically last around 18 months and the agency has the power to impose structural remedies, selling off part of their business to improve competition, if significant issues are found.

This is a £7.5 billion ($9.1 billion) market “that underpins a whole host of online services – from social media to AI foundation models,” CMA CEO Sarah Cardell said in a separate statement. “Many businesses now completely rely on cloud services, making effective competition in this market essential.”

Ofcom, which also oversees broadcasting and the postal service, opened a probe last year on concerns that the so-called hyperscale cloud providers — particularly Amazon’s AWS and Microsoft’s Azure — might limit innovation and growth. 

Together they account for as much as four-fifths of revenue in the UK public cloud infrastructure market, with Alphabet Inc.’s Google Cloud accounting for another 5% to 10%, Ofcom said.

Spokespeople for Microsoft and Amazon said the companies would engage with the CMA, which is set to come back with a report by April 2025. AWS also rebutted Ofcom’s conclusions.

“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,” AWS said by email. “Any unwarranted intervention could lead to unintended harm to IT customers and competition.”

AWS said over 90% of its customers pay nothing for data transfers, because they are provided with a free 100 gigabytes per month. However, while they might constitute a minority of its customer roster, larger and more lucrative cloud users could regularly exceed this kind of threshold.

AWS and Microsoft may not always be fully transparent about their infrastructures’ compatibility with rivals, their high levels of profitability and a gradual increase in market concentration indicate limits to competition, and hyperscalers can charge fees for transferring data five-to-ten times higher than smaller rivals, the Ofcom study said. The regulator also cited concerns about Microsoft’s software licensing.

The European Union has also looked into complaints about the cloud industry. Germany’s Federal Cartel Office cited the “strong increase in the importance” of Microsoft’s cloud services when it announced its own probe into the firm’s market power earlier this year.

(Updates with company comments from sevent paragraph)

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