Competition regulator launches investigation into £7.5 billion cloud services market following competition concerns from media watchdog
The UK’s £7.5 billion cloud services market is to be investigated by the Competition and Markets Authority (CMA) after media regulator Ofcom raised concerns about the dominance of technology giants Amazon and Microsoft.
Cloud services are an essential part of how many digital services are delivered to consumers. Businesses in the UK – including telecoms and utilities companies, broadcasters and public services – have come to rely on cloud services for remote and easy access to customer and business data, videos, images and other resources.
Ofcom’s year-long investigation identified practices that make it difficult for businesses to switch suppliers and it has raised particular concerns about market leaders Amazon and Microsoft with their combined 70-80% share of the market.
Fergal Farragher, Ofcom’s director responsible for the market study, said:
‘Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud providers, and it’s not clear that competition is working well. So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.’
Ofcom said there was still some competition in the sector, with innovative products and discounts offered to new customers. But raised concerns about high levels of profitability for Amazon Web Services (AWS) and Microsoft indicating there are limits to the overall level of competition.
Ofcom said that if businesses continue to have difficulty switching and using multiple providers ‘it could make it harder for competitors to gain scale and challenge Amazon and Microsoft effectively.’ Google is their closest competitor, with a market share of between 5% and 10%.
Competition regulator to investigate concerns
The CMA said it would look at whether there were competition concerns in the market and what interventions might be needed to improve the supply of cloud services for UK customers.
Sarah Cardell, Chief Executive of the CMA, said:
‘This is a £7.5 billion 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.
‘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.’
The CMA aims to complete its investigation by April 2025.
Amazon disagrees with Ofcom’s findings
Amazon and Microsoft offer a wide range of cloud hosting services.
An Amazon Web Services (AWS) spokesman said:
‘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. UK 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.’
A Microsoft spokesman said:
‘We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy. We will engage constructively with the CMA as they conduct their cloud services market investigation.’
Consumer lawsuits against Amazon
Amazon is facing two competing multi-million-pound consumer lawsuits for favouring its own products. Amazon has been accused in separate claims from consumer advocates Julie Hunter and Richard Hammond of not always offering customers the best deals. Amazon is also accused of striking a secret deal to increase the cost of Apple products in a £500m consumer lawsuit being pursued by consumer law expert Professor Christine Riefa.
Google is accused of anti-competitive behaviour by shutting out search engine competition in £7 billion lawsuit affecting 65 million UK consumers.
Amazon and Apple accused of striking secret deal to increase the cost of Apple products costing UK consumers £500 million. Sign up for updates.
Two multi-million-pound lawsuits against Amazon allege it does not always offer customers the best deals. Sign up to stay updated.