Britain’s competition regulator says Microsoft and AWS are using their dominance to harm UK cloud customers and proposes to designate both with strategic market status (SMS) to take action against them.

Nothing ever happens quickly in the world of watchdogs and following a 21-month investigation into the health of the local landscape, and a provisional finding in January that “competition is not working as well as it could,” here we are.

An SMS designation would allow the CMA to introduce targeted measures to tackle the multiple concerns it found.

In an eight-page summary [PDF], the CMA says that market concentration is “particularly high” in the case of Infrastructure as a Service (IaaS), and the two largest providers in the UK – Microsoft and AWS – hold “significant unilateral market power” to earn returns above the cost of their capital over a sustained period.

Microsoft and AWS each made up roughly 30 to 40 percent of the Brit cloud market in 2024, it estimates. Google, the third big global cloud player, is spared the same level of scrutiny as it makes up only 5 to 10 percent in the UK, while others such as Oracle and IBM smaller shares and do not offer as wide a range of cloud services.

The CMA says that if the UK market was more competitive, one outcome would be better pricing. The report gives the example that if prices are on average 5 percent above where they would be in well-functioning markets, it means UK businesses are stumping up around £500 million ($661 million) more per year for cloud services than they need to.

Technical and commercial barriers to switching and multicloud give rise to adverse effects on competition (AECs) in cloud services, the CMA says, effectively locking customers into their initial choice and limiting access to other providers’ services.

Most of these issues were already known, and the big question was what the CMA and its Digital Markets Unit (DMU) intended to do about it.

Anyone expecting an answer now will be disappointed because the CMA anticipates “options will be considered by the CMA Board in early 2026,” and it expects “our findings and recommendations will be taken into account as part of its decision.”

However, one thing that looks like it could be addressed is Microsoft’s licensing. This boils down to Microsoft making it more expensive and troublesome for customers to run its software such as Windows Server or SQL Server on rival cloud infrastructure.

Similar concerns were raised on the other side of the pond. In November last year, The Register reported that the US Federal Trade Commission had launched an antitrust investigation into the Windows giant, requesting information on its cloud, AI, and infosec businesses. The probe is ongoing. The EU is also paying close attention.

The CMA says these licensing practices further restrict the already limited appeal and availability of alternative products and providers.

This is a particular bugbear for Google which focused on the part about Microsoft’s licensing in its official statement regarding the final decision.

“The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the UK. Swift action from the DMU is essential to ensure British businesses pay a fair price and to unleash choice, innovation and economic growth in the UK,” said Google Cloud’s EMEA VP of Customer Engineering, Chris Lindsay.

Microsoft, naturally, is less keen on the outcome.

“The CMA Panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment, and rapid, AI-driven changes,” a spokesperson told us.

“Its recommendations fail to cover Google, one of the fastest-growing cloud market participants. Microsoft looks forward to working with the Digital Markets Unit toward an outcome that more accurately reflects the current competition in cloud that benefits UK customers.”

As the other cloud operator likely to be designated an SMS, AWS is also not happy, saying the final report disregards clear evidence of robust competition in the UK’s IT services industry, which it reckons cloud computing has revolutionized by reducing costs.

“The action proposed by the Inquiry Group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses,” an AWS a spokesperson told us.

“It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness. We will continue to engage constructively with the CMA as they consider their next steps.”

Others don’t think the CMA goes far enough. Mark Boost, CEO at cloud biz Civo and a vocal critic of the big players, said: “This feels like a repeat of the provisional decision, but only with softer edges. The CMA has identified the same issues but failed to follow through with the urgency that the market needs.”

The Reg understands that the CMA is due to publish a fuller report later. ®