Due to “significant concerns” regarding the conduct of some providers, Ofcom suggests referring the sector to CMA.
The UK’s Ofcom plans to refer the cloud services market to the CMA due to “significant concerns” about Amazon and Microsoft’s market positions and alleged abuse of competition, including practices that may inhibit switching providers.
Ofcom has opened a consultation, giving companies and other relevant organizations until 17 May to respond, after which the regulatory body will make a final decision on whether to refer the cloud services market to the CMA by 5 October. The online cloud services market has grown significantly in the past decade, providing remote datacentres for a fee and becoming a critical foundation for many leading websites and online services, such as video streaming and mobile apps, as well as government webpages. Amazon Web Services and Microsoft Azure have gained significant market share, controlling between 60% and 70% of the UK market, while Google owns between 5% and 10%. This growth has contributed to the soaring global profits of Amazon and Microsoft.
Ofcom’s director, Fergal Farragher, conducted a sector study and expressed concerns regarding the conduct of some of the world’s largest tech companies, stating that the “digital backbone” of the economy has “some concerning practices.” He added that high barriers to switching are already damaging competition in a rapidly expanding market. Ofcom discovered “reasonable grounds to suspect that there are features in the public cloud infrastructure services market that may have an adverse effect on competition in the UK,” such as exit fees, restrictions on cross-platform compatibility, and discounts that could distort competition. These market features can create difficulties for existing customers when bargaining for a good deal with their provider, leading to significant price hikes upon contract renewals.
According to Ofcom, the practices in question make it arduous for customers to switch providers, use multiple providers simultaneously, and for smaller providers to compete. Amazon and Microsoft stated their willingness to collaborate with Ofcom. Amazon’s spokesperson commented that the UK has a flourishing IT sector, with clients having access to a broad range of IT providers.
