31 July 2025 – The UK’s Competition and Markets Authority (CMA) has concluded that competition in the cloud services market is not working well and has called for major regulatory action targeting tech giants Microsoft and Amazon Web Services (AWS).
In its final decision following a detailed market investigation, the CMA found that structural features of the UK’s cloud market—including high levels of market concentration, significant barriers to switching, and Microsoft’s restrictive software licensing practices—are creating adverse effects on competition (AECs).
To address these concerns, the CMA is recommending that its board launch investigations under the new Digital Markets, Competition and Consumers (DMCC) Act to consider designating Microsoft and AWS as having Strategic Market Status (SMS). Such a designation would allow the regulator to impose targeted, legally enforceable remedies to improve market outcomes.
Microsoft and AWS together held [60–80]% of the infrastructure-as-a-service (IaaS) market in 2024, with Microsoft’s share increasing and AWS’s declining. The CMA found that both firms have been earning sustained profits well above their cost of capital and face limited competition from smaller rivals like Google Cloud, Oracle, and IBM.
“Cloud services are vital to the UK economy and digital infrastructure. It is essential that competition works well in these markets to foster innovation, lower prices, and give customers real choice,” the CMA stated.
The investigation also highlighted that:
- Less than 1% of customers switch cloud providers annually.
- Barriers such as data transfer (“egress”) fees and technical incompatibilities lock users into their initial providers.
- Microsoft’s software licensing practices give it a distinct advantage over competitors, disadvantaging AWS and Google when customers use Microsoft software in the cloud.
Although AI-related services are expected to reshape competition in the future, the CMA found that they currently play a limited role in altering market dynamics.
Pending the CMA Board’s prioritisation decision in early 2026, the authority urged ongoing monitoring of the market and suggested that the new digital powers provide the most effective route to address the competition harms identified.
If implemented, the remedies could include conduct requirements, interoperability mandates, or other interventions designed to open up the cloud services sector to greater competition.
