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Targetting AWS, Microsoft? British competition regulator soon to announce “behavioural” remedies for cloud sector
The UK competition regulator is reportedly about to reveal its solutions for the cloud infrastructure industry, which potentially could involve a number of big name tech giants.
CNBC reported, citing two sources familiar with the matter, that the Competition and Markets Authority (CMA) will soon announce “behavioural” remedies to address anti-competitive practices in the cloud infrastructure industry.
The UK probe into the cloud computing sector began in September 2022, when Ofcom had announced it would “examine the position of Amazon, Microsoft and Google in cloud services,” as part of a “new programme of work to ensure that digital communications markets are working well for people and businesses in the UK.”
Anti-competitive cloud market?
A year later in October 2023 Ofcom announced that its market study had “uncovered features that could limit competition in the cloud segment”.
It therefore asked the CMA to investigate Amazon and Microsoft’s dominance of the UK cloud market.
The cloud computing market is of course dominated by the two American tech giants (Amazon AWS and Microsoft Azure), but also involves a number of smaller service providers such as Google Cloud Platform, Oracle Cloud, IBM Cloud and others.
One of the sources told CNBC that there’s a chance Google may be excluded from the scope of the competition remedies, due to the fact that it is smaller in size compared to market leaders AWS and Microsoft Azure.
Behavioural remedies
According to the CNBC report, the UK’s CMA said in June that it was more minded toward considering behavioural remedies to resolve its concerns as opposed to “structural” remedies, such as ordering divestments or operational separations.
Among the key issues the CMA is expected to address with recommended behavioural remedies, are so-called “egress” fees charging companies for transferring data from one cloud to another, licensing fees viewed as unfair, volume discounts, and interoperability issues that make it harder to switch vendor, CNBC reported.
Possible solutions that were touted in the summer include imposing price controls thereby restricting the level of egress fees, lowering technical barriers to switching cloud providers, and banning agreements encouraging firms to commit more spend in return for discounts.
A more contentious measure the CMA reportedly said it was considering was requiring Microsoft to apply the same pricing for its software regardless of which cloud it’s hosted on – a move that would have a significant impact on Microsoft’s pricing structures, CNBC noted.
CMA timelines
The CMA had been expected to publish its provisional decision in November to December 2024.
And now the sources have reportedly told CNBC that the cloud market remedies could be announced within the next two weeks.
A CMA spokesperson declined to comment on the specific timing of its provisional decision when asked by CNBC.
Anti-growth rethink?
Meanwhile in an interview with the Financial Times newspaper, CMA chief executive Sarah Cardell reportedly said that the regulator is very aware that boosting the UK economy is an important aspect of its mandate.
Image credit: CMA
That comes weeks after UK Prime Minister Sir Keir Starmer had claimed the agency was holding back Britain’s growth.
The CMA under the previous Conservative government had adopted a robust attitude to policing big acquisitions and mergers in the tech space, even when none-British companies were involved such as Microsoft’s $75 billion acquisition of Activision Blizzard (which triggered a notable clash with senior Microsoft officials).
In a speech Thursday at the UK policy thinktank Chatham House, the CMA’s Sarah Cardell announced plans for a review in 2025 into the regulator’s approach to approving mergers, and whether it should more frequently use “behavioural remedies” when approving deals.
These can include investment commitments or mandatory price freezes, but typically offer weaker consumer protection than traditional requirements that companies sell part of the merged business.
A good example of this is the CMA is now widely expected to clear the £16.5bn merger between Vodafone and CK Hutchison’s Three UK in the coming weeks, but only if they agree to certain conditions.
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