Ofcom Warns of Amazon, Microsoft Dominance in Cloud Services

(Bloomberg) -- Amazon.com Inc. and Microsoft Corp.’s cloud services could face a full-blown antitrust probe in the UK after the country’s digital regulator said the firms may be abusing their market power to thwart fair competition.

Ofcom said Wednesday it had found evidence of practices that make it more difficult for people to switch and use multiple cloud suppliers, as part of its yearlong study into the cloud market. It said it was “particularly concerned” about the US tech firms because of their market position.

“High barriers to switching are already harming competition in what is a fast-growing market,” Fergal Farragher, Ofcom’s Director responsible for the Market Study, said in a statement. “We think more in-depth scrutiny is needed.”  

Ofcom, which also oversees broadcasting, telecommunications and the postal service, opened a probe in October based on concerns that the so-called hyperscale cloud providers — Amazon’s AWS, Microsoft’s Azure, and Alphabet Inc.’s Google Cloud — might limit innovation and growth. They account for four-fifths of revenue in the UK public cloud infrastructure market, which Ofcom said is worth £15 billion ($18.7 billion). 

The agency said it would refer the cloud infrastructure market to the Competition and Markets Authority for it to carry out a market investigation. Ofcom’s final report on its findings and its decision on the referral will be made before Oct. 5. 

“We stand ready to carry out a market investigation into this area, should Ofcom determine it is required following the completion of its consultation process,” a CMA spokesperson said. 

The CMA is currently one of the most high-profile watchdogs probing Microsoft’s $69 billion takeover of Activision Blizzard Inc. It said last month it had narrowed its probe to focus solely on cloud gaming. 

The European Union has also faced complaints from cloud firms over potential antitrust violations in the industry. Germany’s Federal Cartel Office cited the “strong increase in the importance” of Microsoft’s cloud services when it recently announced a probe into the firm’s market power.

Ofcom flagged hurdles that could make it hard for UK cloud service customers to switch providers, such as the charges payable to transfer data, and technical restrictions on interoperability between different platforms. It also said discounts can be used by the biggest businesses to entice customers to use one provider when they could be getting better quality elsewhere.

“We remain committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy,” a Microsoft spokesperson said. 

An Amazon AWS spokesperson said it will continue to work with Ofcom ahead of the final report. 

“We design our cloud services to give customers the freedom to build the solution that is right for them, with the technology of their choice,” the spokesperson said.