Big Tech companies have pushed back against a damning report from the UK’s competition watchdog, which warned that Microsoft and Amazon’s dominance in the £10.5bn cloud computing market is stifling competition and harming UK businesses.
The Competition and Markets Authority (CMA) on Thursday published the final findings of its 21-month cloud investigation, concluding that Microsoft and Amazon Web Services (AWS) hold a “significant” share of UK customer spending – up to 70 per cent combined- and recommending that both firms be assessed for Strategic Market Status (SMS) under the UK’s new digital regulations.
The regulator also singled out Microsoft’s software licensing practices, stating they “adversely impact competition” by increasing costs for rivals like AWS and Google Cloud.
Microsoft and AWS fire back
But both Microsoft and AWS sharply criticised the CMA’s conclusions. A Microsoft spokesperson said: “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.”
Microsoft also argued that the report’s recommendations failed to account for Google’s fast-growing share of the market and said it would “work with the Digital Markets Unit toward an outcome that more accurately reflects the current competition in cloud”.
An AWS spokesperson said the watchdog had disregarded “clear evidence of robust competition in the UK’s IT services industry” and warned that the recommendations could backfire.
“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,” they said.
They added that such regulatory uncertainty “risks making the UK a global outlier at a time when businesses need regulatory predictability”.
Google welcomes report as ‘watershed moment’
Google, which lags behind AWS and Microsoft Azure in UK cloud share, welcomed the CMA’s call for action.
“The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the UK”, said Chris Lindsay, Vice President, Customer Engineering EMEA at Google Cloud.
He added that swift intervention from the CMA’s Digital Markets Unit is needed “to ensure British businesses pay a fair price and to unleash choice, innovation and economic growth”.
Paul Mackay, VP of Cloud at software firm Cloudera, said the report landed at a “crucial time” as AI adoption and concerns over data sovereignty gain pace in Europe.
“Businesses will certainly welcome the possibility of a more flexible multi-cloud model once barriers – such as interoperability of services – are removed,” he said, warning that many firms remain locked into providers due to high switching costs.
He noted the ruling could also support the UK’s broader ambition to lead in AI: “This ruling could help the government in its pursuit of AI innovation… managing multiple models across different providers will become essential.”
Future outlook
The CMA has stopped short of launching an immediate investigation into Microsoft or AWS under the Digital Markets, Competition and Consumers (DMCC) Act.
Instead, it recommended that the CMA board prioritise SMS designations for both companies in 2026, once it has completed ongoing probes into Google and Apple.
If Microsoft and AWS are given SMS status, they could face legally binding conduct requirements – including potentially altering how they price, license, or interoperate their services.
While the CMA said the influence of AI on competition remains limited today, it expects that AI-powered services will play a greater role in cloud competition in the future, particularly given the close integration between cloud providers and AI model developers.
The cloud infrastructure market has become increasingly critical to the UK’s digital economy, with customer spend rising nearly 30 per cent year-on-year.
The regulator noted that cloud services underpin everything from e-commerce and financial services to the training of AI models.
But with power concentrated in the hands of a few players and growing concerns over interoperability and software lock-in, the CMA warned that only bold regulatory action can ensure a level playing field.