UK Competition Authority Set to Propose Remedies for Cloud Computing Industry

Overview

The UK’s Competition and Markets Authority (CMA) is poised to announce measures addressing competition concerns in the multibillion-pound cloud computing sector. These remedies aim to counter anti-competitive practices among dominant cloud service providers, following an extensive market investigation.

Timeline and Scope

Provisional Decision: The remedies are expected to be revealed within the next two weeks.
Investigation Origin: The CMA took up the probe in 2022 after a referral from Ofcom, which had been examining the dominance of cloud giants like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
Primary Targets: Amazon and Microsoft dominate the market, while Google, being relatively smaller, may be excluded from some of the remedies.

Key Issues Identified

The CMA is concerned with practices that hinder fair competition and consumer choice, including:

Egress Fees: Charges for transferring data between cloud platforms.
Licensing Fees: Unfair pricing structures for software products hosted on non-native clouds.
Volume Discounts: Discounts that disproportionately benefit larger clients and lock-in smaller players.
Interoperability Barriers: Technical challenges making it difficult to switch providers.

Proposed Remedies

The CMA has indicated a preference for behavioral remedies over structural ones, such as forced divestments. Potential measures include:

Price Controls: Limiting egress fees to lower switching costs for customers.
Improved Interoperability: Removing technical barriers to enhance flexibility in cloud migration.
Pricing Parity: Requiring Microsoft to apply uniform pricing for its productivity software, regardless of the hosting cloud.
Volume Discount Restrictions: Banning agreements that tie discounts to higher spending commitments.

These remedies aim to ensure a fairer playing field while avoiding drastic measures like operational separations.

CMA’s Regulatory Stance

CMA Chief Executive Sarah Cardell is expected to address the agency’s approach to competition enforcement in a speech at Chatham House. She has defended the CMA’s role amid criticisms from Prime Minister Keir Starmer, emphasizing the need for balanced growth alongside regulatory oversight.

Industry Impact

Amazon and Microsoft: Declined to comment on the upcoming remedies.
Google: Has not responded but may see limited impact given its smaller market share compared to AWS and Azure.
Market Dynamics: The proposed measures could reshape pricing and operational strategies across the cloud sector, fostering a more competitive environment.