The Competition and Markets Authority (CMA) is to investigate the supply of cloud services in the UK following a referral from Ofcom after publication of its market study.
The CMA’s probe will address competition concerns and, if there are found to be any, what interventions it can make to improve the supply of these important cloud services for UK customers. It notes that these allow remote access to computing resources on demand and over a network and are being rapidly adopted by many businesses and public sector organisations, and so have become an essential part of how many digital services are delivered to consumers.
“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny,” said CMA CEO Sarah Cardell.
"Many businesses now completely rely on cloud services, making effective competition in this market essential. Strong competition ensures 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 estimates that the market for cloud services in the UK was worth up to £7.5 billion in 2022. In May, it announced that it was starting a market study to see if these markets are “working well” and whether “any regulatory action is required”. The study identified a number of features that make it more difficult for customers to switch and use multiple cloud suppliers. These include:
- high egress fees, such as charges that cloud customers must pay to move their data out of the cloud;
- discounts that may incentivise customers to use only one cloud provider;
- and technical barriers to switching, which may prevent customers from being able to switch between different clouds or use more than one provider.
Ofcom's market study finds there are two leading providers of cloud infrastructure services in the UK: Amazon Web Services and Microsoft, who have a combined market share of 60-70%. Google is their closest competitor with a share of 5-10%. It also notes concern about the practices of Amazon and Microsoft because of their market position.
The CMA’s independent inquiry group will now carry out an investigation on whether competition in this market is working well and if not, what action should be taken to address any issues it finds. The group will publish an issues statement setting out the proposed focus of the CMA’s investigation shortly for consultation with a view to concluding this investigation by April 2025.
In its 2023 to 2024 Annual Plan, the CMA had outlined its areas of focus for the next three years, which includes ensuring effective competition in digital markets as a priority.
The CMA’s market investigation into cloud services will therefore form an important part of its wider programme of work in digital markets including under the incoming Digital Markets, Competition and Consumer Bill.
