CMA’s provisional findings regarding cloud services market investigation

On 28th January 2025, the Competition and Markets Authority (CMA) published their provisional decision following their investigation into the supply of public cloud infrastructure in the UK, the purpose of which, was to identify if any cloud services' feature(s) restrict or distort competition in the UK market.  With a revenue of £9 billion for the UK market in 2023, ensuring competition, enabling innovation and diversity of thought in the cloud services industry, is crucial for both customers and businesses.

Please note all findings listed by the CMA are currently provisional, and a final decision will be reached by the 4th August 2025 (the statutory deadline).

Key provisional findings

The investigation found that Amazon Web Services (AWS) and Microsoft are the two dominant players in the UK market, each holding a share of 30-40%. As a result, both companies have consistently made sustained returns "substantially above their cost of capital" on their cloud services, emphasising the need for effective price competition in the market. However, providing effective competition is a difficult task for smaller industry players, with significant barriers to entry, sunk costs and economies of scale creating a beneficial environment for larger cloud providers. Alongside this, the CMA found customer loyalty is common, due to the technical difficulties in using multiple cloud providers and the commercial and technical disruption when moving providers.  Further to this, fees charged for transferring data between cloud providers were another area referenced as reducing customer movement. Consequently, signing new customers is a difficult task, with the necessary costs often perceived as overriding any benefits received from changing providers. Overall, the CMA concluded that customers have a limited ability and/or incentive to change providers and choose the best cloud provider for their circumstances. 

The CMA also referenced Microsoft's unique power to weaken the position of rivals who sell cloud services incorporating Microsoft software. When reviewing the use of Microsoft software on Microsoft’s cloud services compared to AWS’ or Google’s cloud services, the CMA found differences in price and/or quality. Further to this, the mark up cost for rivals to licence such Microsoft products were sometimes more expensive than retail prices charged to Microsoft customers. 

Proposed remedies

• It was recommended that the CMA use its new digital market powers (under the Digital Markets, Competition and Consumers Act), to prioritise strategic market status (SMS) investigations into AWS and Microsoft. Following this, should either (or both) be designated as holding SMS for their cloud services activity, the CMA would be able to "take a targeted an iterative approach" to address market concerns.
• The CMA considered such action would benefit the majority of UK customers and indirectly re-align competitive conditions in the cloud services market.
• The CMA considered there were material risks in using its powers to address technical barriers, transfer fees and Microsoft's licensing practices, and that focus should be on an SMS investigation. 

What's next?

The CMA will reach a final decision on the investigation by the 4th August 2025, following the review of any submissions made by interested parties.