Microsoft has hit out at the ruling in the long-awaited investigation into the United Kingdom’s cloud market, claiming the country’s antitrust regulator “ignor[ed] that the cloud market has never been so dynamic and competitive.”

The Competition and Markets Authority (CMA) has, since late 2023, been examining the market dominance of Microsoft and Amazon Web Services (AWS) in the U.K. cloud market.

In its highly anticipated final decision, the CMA's Digital Markets Unit found Microsoft and AWS “hold significant unilateral market power in the cloud services markets,” leaving customers with a limited choice of offerings.

Microsoft specifically drew ire from the CMA after the regulator took issue with the hyperscaler’s licensing practices in that they “have the effect of reducing competition … by adversely impacting the competitiveness of AWS and Google in the supply of cloud services.”

A Microsoft spokesperson told SDxCentral that the decision “misses the mark.”

“[The CMA’s] recommendations fail to cover Google, one of the fastest-growing cloud market participants," the spokesperson noted. "Microsoft looks forward to working with the Digital Markets Unit toward an outcome that more accurately reflects the current competition in cloud that benefits U.K. customers.”

AWS also took issue with the ruling, with a company spokesperson telling SDxCentral: “The Inquiry Group’s final report disregards clear evidence of robust competition in the UK’s IT services industry, which cloud computing has revolutionised by dramatically reducing costs and expanding customer choice and flexibility.

"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. It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness.

"We will continue to engage constructively with the CMA as they consider their next steps.”

A more serious probe awaits?

In its provisional decision published back in January, the CMA acknowledged that benefits like customer discounts were outweighed by Microsoft's and AWS’ dominance, creating sizable technical and commercial barriers to entry into the U.K. cloud market.

Both AWS and Microsoft hit out at that initial decision, and following publication of the final ruling, the pair could face another probe, called a “strategic market status."

The digital markets competition regime, which entered into force at the turn of the year, provides the CMA with sweeping powers to enforce pro-competition interventions on strategic market status-designed companies.

Following its final decision in the cloud market investigation, the CMA will now consider strategic market status designations for both Microsoft and AWS, which, if imposed, would allow the regulator to put in place “targeted and bespoke interventions” aimed at addressing its concerns.

The report suggests measures aimed at the pair would “address market-wide concerns by directly benefiting most U.K. customers and producing wider indirect effects by altering the competitive conditions for other providers.”

The CMA said in its decision that the strategic market status designations will be made early next year. Once confirmed, the regulator has a statutory limit of nine months to implement remedies.

Microsoft singled out for software licensing practices

The CMA’s long-running cloud market investigation was one of several probes into some of the biggest names in tech, with the regulator also having previously examined Amazon's $4 billion investment in Anthropic, and Apple and Google’s “effective duopoly” on cloud gaming and web browsing.

Microsoft has drawn particular attention from the country’s antitrust regulator, having faced probes into its partnership with OpenAI and its $16 million investment in Mistral, though both cases were later dropped. That focus on the hyperscaler continued in the cloud market investigation, with Microsoft singled out for holding “significant market power” concerning its software products.

Microsoft has faced repeated attacks from cloud industry groups over its software licensing practices, with claims that the hyperscaler makes it intentionally difficult for customers to migrate to another provider.

The subject of exit issues was referenced in the CMA’s report, with the regulator finding Microsoft’s market power came from customers being “unable or unwilling to switch away from them.”

The CMA went so far as to suggest that Microsoft’s software licensing practices harm even its biggest competitors.

“Microsoft does not make certain products available to AWS and Google through their licensing agreements, and customers with existing licenses cannot bring these to AWS and Google in most instances,” the regulator’s decision reads.

These restrictions mean that AWS’ and Google’s competitive offerings are directly affected by Microsoft’s licensing practices, with the CMA stating: “As a result, Microsoft faces weaker competitive constraints from AWS and Google, its most significant competitors, which is reducing competition in cloud services markets.”

Microsoft’s software licensing practices were the sticking point in a dispute brought against it by the Cloud Infrastructure Services Providers in Europe (CISPE) trade group. The pair has since settled and recently struck a deal that would allow its members to offer its software services under a pay-as-you-go model.

That agreement, however, was attacked by groups like the Coalition for Fair Software Licensing, whose executive director, Ryan Triplette, described it as “smoke and mirrors.”

Following this latest ruling, Triplette welcomed the decision but told SDxCentral that "more needs to be done to protect customers."

"We urge the CMA to use the powers at its disposal now to address these harms, rather than embark upon a new investigation that may not give customers relief for years to come," he said. "If history is any indicator, Microsoft will offer a few empty concessions to delay accountability but continue to restrict customer choice in the cloud and in security and AI.”

While Microsoft called out the CMA for failing to acknowledge Google Cloud's growing market presence, the rival came out in support of the ruling.

"The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the U.K.," Chris Lindsay, Google Cloud's VP of customer engineering, said in a statement provided to SDxCentral.

"Swift action from the DMU is essential to ensure British businesses pay a fair price and to unleash choice, innovation and economic growth in the U.K.”