The EU risks losing €1.2 trillion ($1.3trn) in GDP if it fails to address anti-competitive practices in the region’s cloud market, a new report claims.

Commissioned by the cloud lobbying group, the Open Cloud Coalition (OCC), the report from the European Centre of International Political Economy (ECIPE) suggests that failure to resolve the continent’s lack of competition in the market would see local governments lose out on $522 billion in productivity and fiscal savings by the end of the decade.

The European Commission has been actively examining cases of cartel activity in the cloud space since mid-2023. But two years on, the OCC wants more immediate action, using its report to call on regional competition authorities to be more assertive.

“The longer we wait to act, the worse it will get,” said Nicky Stewart, senior advisor to the OCC. “Barriers to switching rise, innovation stalls, and the cost to the economy keeps climbing. We need firm and effective antitrust enforcement, and we need it now.”

The report calls for European lawmakers to issue guidance on licensing and interoperability and to actively monitor “systemic lock-in.”

Among the requested remedies are demands for case-by-case analysis of lock-in practices covering areas such as bundling and “discriminatory licensing.”

An earlier EU probe into Microsoft’s bundling practices saw the hyperscaler change up how it packages together products like its Office 365 and Teams over concerns of vendor lock-in.

The report, however, claims that cloud providers that embed their own proprietary AI models and chips into products - like Microsoft Copilot or Google’s TPUs - “entrench market power.”

“Bundling these critical features into broader software or infrastructure packages can deepen vendor lock-in and raise serious competition concerns,” the report reads.

“As major technology firms like Google, Amazon, and Microsoft expand their control across the AI value chain… these firms can optimise performance within their ecosystem while making interoperability more difficult, reinforcing vendor lock-in, and reducing opportunities for open-source or specialist models to compete.”

‘Target real harms, not architectures’

In addition to concerns about bundling, the report authors contend that the current state of the European cloud market is being hampered by high switching costs, which prevent cloud users from scaling their operations and reducing costs.

They called on European regulators to demand multi-cloud compatibility and open licensing, while also issuing guidance on fair contract terms to “avoid legal ambiguity.”

OCC and ECIPE’s report also demanded that regulators rework related legislation to “target real harms, not architectures.”

They want sovereignty – one of the bloc’s current fascinations in a bid to reduce reliance on US businesses and keep data within the bloc – to focus on user freedom and not supplier nationality.

The group also wants local standard-setting organizations to issue FRAND (fair, reasonable, and non-discriminatory) licensing guidance that would distinguish between service types to reduce uncertainty.

“Real change will require decisive policy action in EU digital and data regulation, effective antitrust enforcement, and a clear commitment to unlock interoperability in the cloud market,” Matthias Bauer, director at ECIPE, added.

Not quite as open?

The OCC was accused of not being as open as its name suggests by Microsoft. The hyperscaler alleged last year that the group was being covertly bankrolled by Google.

The group hit back at Microsoft’s claims, with senior advisor Nicky Stewart saying at the time that the group would not allow a member of its supporters to “cast shade on the debate in an effort to obscure the wider issues.”

Microsoft claimed Google’s alleged backing of the OCC was a way for its hyperscale rival to continue a long-running antitrust battle between the former and the Cloud Infrastructure Services Providers in Europe (CISPE).

Microsoft paid €20 million ($21.7m) to settle the dispute last summer, despite its rival offering millions of dollars to keep the dispute alive.

Stewart, a former employee of the now-defunct UKCloud, provided evidence during the UK's Competition and Market Authority's investigation into the cloud computing market. She argued that the dominance of large hyperscalers directly contributed to the demise of smaller providers like her former employer.

In response to Microsoft’s claims, Stewart said late last year the group would “not be swayed or bullied by larger cloud providers who would prefer to silence those who speak out.”