Cloud “remains central” to CMA’s approach as it announces investigation into Microsoft’s business software ecosystem

The board of the Competition and Markets Authority (CMA) has announced that the next strategic market status (SMS) investigation under its digital markets powers will be into Microsoft’s business software ecosystem.

Many had expected the CMA’s next SMS investigations to be into Amazon and Microsoft’s cloud services - the CMA’s market investigation into cloud services last year found that Amazon and Microsoft have significant market power, and recommended SMS investigations into their cloud services as the next step. Particular concerns identified in the market investigation included limits to customer choice due to data egress fees and barriers to interoperability which prevent switching and multi-cloud use. 

But for now at least, any SMS investigations into Amazon and Microsoft’s cloud services appear to be on hold, following steps by both companies to lower egress fees and improve interoperability – steps which the CMA considers should enable greater scope for multi-homing to support customer choice and the resilience of UK tech stacks. Nevertheless, the CMA considers that further steps are also required to make it easier for UK customers to manage applications across clouds - it plans to continue active engagement with Microsoft and Amazon to ensure they take meaningful steps to promote choice for UK cloud customers, and will be seeking views from UK customers and competitors before reviewing progress in six months.

As for the newly announced  SMS investigation into Microsoft’s business software ecosystem, due to commence in May, the CMA says the investigation will allow it to act on the remaining major area of concern from the cloud market investigation – Microsoft’s use of software licensing to affect competition in cloud. It will also enable the CMA to ensure a level playing field among providers at a critical moment when the embedding of advanced AI into well-known workplace tools is reshaping the competitive landscape in productivity software. 

Various factors have played into the board’s decision, including the government’s growth-focussed strategic steer, as well as the rapidly evolving nature of technologies (including AI and emerging agentic capabilities) and Amazon and Microsoft’s actions following engagement with the CMA.  No doubt in an attempt to distinguish the UK’s digital markets regime from the approach under the Digital Markets Act in Europe, the CMA describes the actions it has decided upon as a “mix of approaches” – some legally binding and others drawing on proactive steps from firms – with such flexibility a “novel and deliberate feature” of the UK regime which enables it “to deliver the greatest possible impact for the UK as quickly and proportionately as possible”. 

The CMA is also aware of the wider policy debate regarding the concentrated nature of UK cloud markets and the potential implications for UK resilience, strategic dependence and technology sovereignty. While acknowledging that these issues are for government rather than the CMA, the CMA nevertheless considers that the plans it has outlined today can contribute to broader policy goals, including amongst other things by enabling a broader range of providers to compete and grow, and facilitating UK customers in using multiple providers to mitigate risk from outages.