The UK’s Competition and Markets Authority (CMA) has flagged major concerns about the dominance of AWS and Microsoft in the cloud services sector, stating that competition is not working effectively in Britain’s £9 billion cloud market. With AWS commanding a 40–50% market share and Microsoft close behind at 30–40%, the CMA’s provisional report suggests that their significant market power has stifled alternatives, leaving customers with limited choice and higher costs.

The CMA’s investigation highlights several barriers to fair competition, including high entry costs for rivals, restrictive licensing practices, and “lock-in” fees that deter customers from switching providers. The watchdog noted that AWS and Microsoft’s stronghold extends into both public and private sectors, leaving smaller players struggling to compete.

Microsoft’s software licensing practices came under fire for creating an uneven playing field. The CMA found evidence of Microsoft charging higher fees to customers using competitors like AWS and Google, leveraging its dominance in software like SQL Server and Windows to favor its own cloud services.

Google, although a distant third in market share, escaped similar scrutiny, with a spokesperson commending the CMA’s recognition of restrictive practices and its potential impact on innovation.

Both AWS and Microsoft defended their practices, emphasizing their contributions to innovation and customer savings. However, critics argue that these tech giants have long relied on practices that discourage competition.

Mark Boost, CEO of UK-based cloud company Civo, pointed to sky-high cloud credits as a method often used to lock in customers, which he believes the CMA has overlooked in its findings.

The CMA proposes granting AWS and Microsoft “Strategic Market Status,” a designation that could enable stricter regulations to address anti-competitive behavior. Stakeholders like the Open Cloud Coalition and other cloud providers have praised the CMA’s actions as a step toward fairer competition, though some warn that delays in action risk hindering innovation and economic growth.

With a final report expected later this year, the CMA’s findings could reshape the regulatory landscape for cloud services, pressuring tech giants to adopt more transparent and fair practices while offering smaller competitors a chance to thrive.