The CMA anti-trust investigation into AWS and Microsoft explained: Everything you need to know

Why did Ofcom refer the UK cloud services market to the CMA?

Ofcom published a full-year report that chronicled the findings of its 12-month investigation into the UK cloud infrastructure market in October 2023 that raised red flags about some anti-competitive behaviours it claimed AWS and Microsoft are both known to display. This is why the market has been referred to the CMA.

These red flags included concerns about the fact cloud providers charge customers egress fees to transfer their data to a competitor’s environment, which Ofcom claimed could discourage users from switching between providers.

The report also flagged interoperability restrictions as being another matter of concern, as it means users often have to put additional effort into reconfiguring their data and applications to work in different cloud environments.

The offering of committed spend discounts, which Microsoft and AWS are both known to do to public sector users, was also raised as a red flag by Ofcom as it incentivises users to back a single cloud provider for all or most of their cloud needs, the regulator claimed.

Ofcom’s full-year report also devoted several pages to detailing concerns it had received about how Microsoft charges users more for running versions of its cloud products in its competitors’ hosting environments.

“The [licensing] concerns centre on the way Microsoft sells and licenses some of its software products used by businesses… these include the Windows operating system, Microsoft SQL Server and the Microsoft 365 productive suite,” the Ofcom report stated.

“We have received submissions that say Microsoft engages in several practices that make it less attractive for customers to use Microsoft’s licensed software products on the cloud infrastructure of rival providers compared to Microsoft Azure. The submissions allege that this limits their ability to compete for customers.”

What will the CMA investigation cover?

It will be the CMA’s responsibility to fully investigate the anti-competitive behaviours flagged in the Ofcom report. As well as this, the CMA also has powers to intervene and roll out changes to how the likes of AWS and Microsoft behave to correct any anti-competitive behaviours its work brings to light.

Who is overseeing the CMA investigation?

The CMA appointed an inquiry group to oversee the investigation on 5 October 2023. The group comprises four members: CMA inquiry chair Kip Meek, Robin Foster, Paul Hughes and Colleen Keck.  

How long will the CMA investigation into AWS and Microsoft last?

The CMA’s investigation into the UK cloud infrastructure services market was initially due to run until April 2025, but in mid-September 2024 the organisation confirmed it would be extending the timeframe of its probe until August 2025. 

In a statement published on the CMA website on 19 September 2024, the organisation confirmed it would not be possible to complete its investigation and publish its final report within the original timeline.

And while it now has until 4 August 2024 to complete its investigation, the CMA stated that it wants to conclude the probe “as soon as possible and in advance” of its new deadline.

The original investigation’s length has already raised eyebrows and proven to be a great source of concern for UK cloud market stakeholders, who feared the initial 18-month timeline would pave the way for the companies under investigation to gain more share and influence at the expense of other, smaller providers. With the investigtion now set to last 22 months, these fears may now be heightened further. 

Furthermore, since the CMA’s investigation started, AWS signed several cloud hosting deals with three different government departments that commenced on the same day (1 December 2023) that are valued at more than £800m. These deals are set to run for three years each, so they will still be live once the investigation ends.

What shape could the CMA’s interventions take?

The CMA could ban cloud service providers from charging data egress fees, which Ofcom flagged as a problematic behaviour because it discourages cloud users from switching suppliers due to cost concerns.

Incidentally, in the wake of the CMA probe starting, Google Cloud announced that it was scrapping egress fees for all its customers in January 2024.

And AWS made a similar announcement on 5 March 2024, with its pledge to waive the charges associated with transferring data out to the internet when users want to migrate workloads from its public cloud infrastructure.

In a blog post, announcing the move, the company claimed more than 90% of its customers never incur fees when transferring data out of AWS, because the company already offers 100 gigabytes per month of free transfers from its datacentre regions to the internet.

“If you need more than 100 gigabytes of data transfer out per month while transitioning, you can contact AWS support to ask for free data transfer out to the internet charges for the additional data,” the post stated.

“It’s necessary to go through support because you make hundreds of millions of data transfers each day, and we generally do not know if the data transferred out to the internet is a normal part of your business or a one-time transfer as part of a switch to another cloud provider or on-premises,” the company added.

The AWS blog post made no reference to regulatory pressure being a factor in its decision to waive data egress fees, but did say the move is in keeping with its view that moving to the cloud should give users choice and flexibility.

“We believe this choice must include the one to migrate your data to another cloud provider or on-premises,” the post added.

And doing so will not require users to close their accounts with AWS or change their relationship with the company in anyway, it added.

Just over a week after AWS said it was scrapping data egress fees, Microsoft published a brief blog post confirming that it was doing the same. 

“We support customer choice, including the choice to migrate your data away from Azure,” said the Microsoft blog post. “Azure now offers free egress for customers leaving Azure when taking their data out of the Azure infrastructure via the internet to switch to another cloud provider or an on-premises datacentre.”

Technical and interoperability barriers were also flagged by Ofcom as complicating the lives of enterprises that might want to mix and match cloud services from competing providers. Therefore, Ofcom said the CMA could address this by forcing the hyperscalers to be more transparent about how nicely (or not) their technologies play with their competitors’ offerings.

One area that might be trickier for the CMA to fix is the offering of committed spend discounts, Ofcom acknowledged, because putting a stop to customers being able to access preferential pricing on products would mean higher prices and costs for users.

Has there been any shift in behaviour from AWS and Microsoft since the CMA investigation started?

On the whole, it has been business as usual for AWS and Microsoft. There has been no let-up in Amazon’s use of committed spend discounts to lure in public sector customers, for example.

Despite the offering of discounted pricing being a key area of focus for the CMA’s inquiry, details emerged in December 2023 that AWS had quietly renewed the preferential pricing scheme it had in place with the UK government.

This pricing scheme, known as the One Government Value Agreement (OGVA), has already been used to call off several multimillion-pound contracts, including one valued at £450m with the UK Home Office since its introduction in late 2023.

Where Microsoft is concerned, though, the company has moved to allay concerns about its “unfair” software licensing practices, where its cloud deployments are concerned, by entering discussions with a cloud trade body that has previously reported it for anti-competitive behaviour to the European Commission.

As reported by Computer Weekly in February 2024, Microsoft confirmed it had opened discussions with the Cloud Infrastructure Services Providers in Europe (CISPE) trade body with a view to resolving its concerns about how it charges more for customers opting to run their own software in its cloud.

Has the CMA released any interim findings from its work so far? 

On 23 May 2024, the CMA published the first in a series of working papers, to give stakeholders an insight into the shape its investigation is taking. The publications were released with the caveat that the working papers' contents is not intended to give readers a steer on any provisional or final decisions the CMA is making.  

The working papers include one examining the UK cloud market’s overall competitive landscape, along with others separately looking at how the charging of egress fees and the offering of committed spend discounts might impact which providers companies choose to use.

On 12 June 2024, the CMA followed up these publications with another working paper, focusing exclusively on looking into concerns raised about Microsoft's alleged anti-competitive cloud licensing tactics, which include accusations that the software giant charges enterprises more for running its software in its competitors' clouds. The company has also been similarly accused of charging customers more for opting to run software made by other IT providers in its Azure cloud too. 

What has the response to the interim findings been? 

Perhaps unsurprisingly, Microsoft has not taken kindly to having its cloud licensing practices singled out for scrutiny by the CMA, and has hit out at AWS and Google in its response to the claims that its tactics are driving up the cost of doing business for its rivals.

How it licenses its products for cloud users is an area it has come in for criticism and investigation from regulators in other countries, but the company is firmly of the view that its actions in this area are not negatively impacting AWS and Google.