Updated 14:39 GMT with response from Microsoft.
A UK competition watchdog enquiry has provisionally found that Microsoft’s “conduct is harming competition in cloud services.”
Technical and commercial barriers to switching cloud providers are causing vendor lock-in, an independent enquiry group claimed.
It recommended today (January 28) that the Competition and Markets Authority (CMA), which commissioned the enquiry, designate both AWS and Microsoft “Strategic Market Status” under legislation effective this month. This would let it “introduce pro-competition interventions…”
Microsoft blasted - fairly?
Microsoft came under particular fire in the provisional findings.
“Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud. This reduces the competitive challenge that AWS and Google can provide in cloud services and to Microsoft’s position,” the CMA’s independent enquiry concluded.
Microsoft's Rima Alaily, Deputy General Counsel of Microsoft's its competition law group, responded: “The draft report should be focused on paving the way for the UK's AI-powered future, not fixating on legacy products launched in the last century.
"The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation. What could be better for UK businesses and government?”
See also: AWS throws customers (and regulators) a bone on data exit/cloud transfer costs
The CMA enquiry comes after Microsoft in July 2024 controversially settled a formal anti-trust complaint lodged with the European Commission by European trade association, Cloud Infrastructure Providers of Europe.
CISPE had launched a competition complaint with the EC in 2022, accusing Microsoft of “anti-competitive practices”, including “unjustified and discriminatory bundling, tying, self-preferencing pricing and technical and economic lock-in”, tactics “used by dominant software companies to restrict the choice of European companies as they move to the cloud.”
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Microsoft “uses its dominance in productivity software to direct European customers to its own Azure cloud infrastructure to the detriment of European cloud infrastructure providers and users of IT services” it had claimed. (As part of a $20 million settlement Microsoft agreed to pay-as-you-go licensing for SQL Server and free Extended Security Updates ESU available on CISPE members’ cloud stacks…)
Writing in The Stack last summer, Nicky Stewart, a former Cabinet Office director and former Commercial Director of UKCloud said: “Microsoft defeated a complaint that could have cost it billions in fines, forced small EU cloud providers to take a substandard deal, and fractured a powerful critic for about half of CEO Satya Nadella’s annual salary. In addition to withdrawing its complaint, CISPE now exists under a gag order,” she said.
Google Cloud on CMA preliminary findings
Chris Lindsay, VP, Customer Engineering EMEA, Google Cloud, said of today’s preliminary findings: “We will continue to engage constructively with the CMA to support openness, innovation, and growth for the UK cloud market. Restrictive licensing harms UK cloud customers, threatens economic growth, and stifles innovation, and we are encouraged that the CMA has recognised the harm of these practices.”
Mark Boost, CEO of Civo, a containerised workload hosting specialist said in an emailed comment: “For years, hyperscalers have been allowed to stifle the cloud market with a host of anti-competitive practices.
Today’s provisional decision from the CMA indicates a cautious step in the right direction. Many of us in the industry, including members of the Open Cloud Coalition (OCC), have long called for clear measures from regulators. Using the CMA’s new digital markets powers to investigate AWS and Microsoft will ensure closer monitoring of potentially unfair practices, and a focus on specific tools like egress fees is promising.
Elephant in the room unaddressed?
“However, the elephant in the room has gone unaddressed: sky-high cloud credits are the most damaging method used by hyperscalers to lock in customers, but there is no mention of this in the provisional findings.
“It's plain for all to see that hyperscalers’ licensing practices are anti-competitive. They can discourage users from seeking alternative platforms, lock them into paying unnecessarily high prices for features and capabilities that they do not want or use, and greatly limit interoperability. That the CMA has recognised this view is heartening, but the job’s far from done. We still have to await the final outcome due in August, and recent personnel changes in CMA leadership may mean the organisation ultimately takes a different path. If the CMA stays its current course, providers that have continuously delivered the service that customers want will be well-positioned in this new regulatory landscape.”
AWS: CMA should "carefully consider..."
An AWS spokesperson said: "The proposed intervention under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) is not warranted. The evidence demonstrates the IT services industry is highly competitive. Cloud computing has lowered costs for UK businesses with on-demand services and pay-as-you-go pricing, expanded product choice, and increased competition and innovation.
“We welcome the CMA's updated finding that customer discounts do not harm competition. But we urge the CMA to carefully consider how regulatory intervention in other areas will stifle innovation and ultimately harm customers in the UK. We will continue to work constructively with the CMA as they work on their final report.”
Microsoft has been contacted for comment.
