Amazon, Microsoft could face UK antitrust probe over cloud services

London CNN

Ofcom, the British media and communications regulator, has expressed'significant concern' about Amazon and Microsoft's potential to harm competition in the cloud service market.

Ofcom announced Wednesday that it would 'propose to refer' the UK antitrust regulator Competition and Markets Authority to investigate the cloud services sector.

Ofcom's investigation, launched in October, has so far revealed a number of 'concerning' practices by many tech companies around the world.

High barriers to switching already hurt the competition in a market that is growing rapidly. Farragher said that he believes a closer look is required to ensure the services are working for both consumers and businesses.

The Competition and Markets Authority confirmed that it had received Ofcom’s preliminary findings on Wednesday and is reviewing them. We are ready to conduct a market study in this area if Ofcom determines it's necessary, said a spokesperson.

Ofcom's announcement comes just days after Google Cloud accused Microsoft of anti-competitive practices in cloud computing. Amit Zavery, Vice President of Google Cloud in an interview with Reuters said that the company has raised the issue with the antitrust agencies. He also urged EU antitrust authorities to take a closer inspection.

Cloud services include Gmail, Dropbox and other applications that are available to consumers and businesses via the Internet.

The Digital Markets Act of Europe, which takes effect in May, is designed to increase competition for online services. The British Digital Markets, Competition and Consumer Bill will be presented to lawmakers in this year.

Ofcom reports that Amazon's (AMZN), Web Services, and Microsoft Azure together have a market share in the UK of 60-70%. Google (GOOGL), their closest competitor, has a market share of 5%-10%.

Ofcom stated that the three companies charge high fees for data transfer out of cloud services, which discourages users from changing providers or using more than one provider to meet their needs.

The report also highlighted technical restrictions that are imposed by leading cloud providers, which prevent certain services of one provider from working effectively with services provided by other firms. It said that the fee discounts were designed to encourage customers to choose a single cloud provider for their entire or majority of cloud needs.

Ofcom stated that there were signs that these market characteristics were already harming customers, with evidence of cloud clients facing significant price increases as they renew their contracts.

Microsoft's spokesperson confirmed that the company will continue to work with Ofcom in its investigation. The spokesperson said, 'We are committed to making sure the UK cloud industry remains highly competitive'. CNN has also reached out to Amazon and Google.

Ofcom is seeking feedback on its interim findings and plans to publish a decision on the cloud services market by the end of October.

Ofcom would take a big step by referring to a market study. It said that its proposal reflected the importance of cloud computing for UK businesses and consumers.