The Competition and Markets Authority (CMA) is set to launch an investigation into the dominant market positions of Amazon and Microsoft following a probe into the UK cloud services sector from UK’s telecoms watchdog Ofcom. 

The study found worrying trends in the sector, which was worth an estimated £7.5 billion last year. Notably, Ofcom pointed to three main concerns which made it difficult for customers to switch and use multiple cloud suppliers, creating disadvantages for UK enterprises. 

The first concern was egress fees, where customers need to pay to move their data out of the cloud. Another concern was discounts or incentives used to get customers to use only one cloud provider. The last concern was the technical barriers to switching, which makes it harder for customers to switch between various clouds. 

Ofcom says that these practices make it challenging for users to negotiate favourable deals with providers, leading to price increases during contract renewals. Limitations on using multiple providers also make it harder for smaller companies to compete with the leaders. 

Ofcom said in its study that Amazon and Microsoft are of particular concern in this regard, with a combined market share of up to 80% last year. The next closest competitor, Google, only has a share of 5-10%. 

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“This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models,” said Sarah Cardell, CEO of the CMA.

“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,” she continued. 

The move will see the CMA once again butt heads with Microsoft just weeks after the competition regulator finally opened the door to Microsoft’s £55bn acquisition of Activision Blizzard.

“The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds,” Cardell said.