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Amazon, Microsoft could face UK antitrust probe over cloud services

<i>Yui Mok/PA/AP/FILE</i><br/>Britain's media and communications regulator Ofcom says it has
Britain's media and communications regulator Ofcom says it has "significant concerns" that Amazon and Microsoft could be harming competition in the market for cloud services.

By Hanna Ziady, CNN

Britain’s media and communications regulator Ofcom says it has “significant concerns” that Amazon and Microsoft could be harming competition in the market for cloud services.

In a statement Wednesday, Ofcom said it was “proposing to refer” the cloud services market to the Competition and Markets Authority, the UK antitrust regulator, for further investigation.

Ofcom’s own probe, which it launched in October, had so far uncovered some “concerning practices, including by some of the biggest tech firms in the world,” said Fergal Farragher, the Ofcom director leading the investigation.

“High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services,” Farragher added.

The Competition and Markets Authority said it received Ofcom’s provisional findings Wednesday and was reviewing them. “We stand ready to carry out a market investigation into this area, should Ofcom determine it is required,” a spokesperson said.

The Ofcom announcement comes days after Google Cloud accused Microsoft of anti-competitive cloud computing practices. In an interview with Reuters, Google Cloud Vice President Amit Zavery said the company had raised the issue with antitrust agencies and urged EU antitrust regulators to take a closer look.

In a statement shared with CNN Wednesday, Zavery said Ofcom’s report “highlights the need for certain players in the UK to do more to create a level playing field in the cloud market.”

Cloud services are delivered to businesses and consumers over the internet and include applications such as Gmail and Dropbox.

According to Ofcom, Amazon Web Services (AWS) and Microsoft’s Azure have a combined UK market share of 60% to 70% in cloud services. Google is their closest competitor with 5% to 10%.

Ofcom said the three companies charged high “egress fees” for transferring data out of a cloud, which discourages customers from switching providers or using multiple providers to best serve their needs.

It also flagged technical restrictions imposed by the leading providers that prevent some of the services of one provider working effectively with cloud services from other firms, and said that fee discounts were structured to incentivize customers to use a single provider for all or most of their cloud needs.

There were indications that these market features were already causing harm, “with evidence of cloud customers facing significant price increases when they come to renew their contracts,” Ofcom said.

A Microsoft spokesperson said the company would continue to engage with Ofcom on its investigation. “We remain committed to ensuring the UK cloud industry stays highly competitive,” the spokesperson added.

An AWS spokesperson said: “These are interim findings, and AWS will continue to work with Ofcom ahead of the publication of its final report.”

Ofcom has invited feedback on its proposal for further investigation and will publish a final decision by October 5 on whether to refer the cloud services market to the Competition and Markets Authority.

“Making a market investigation reference would be a significant step for Ofcom to take. Our proposal reflects the importance of cloud computing to UK consumers and businesses,” it said.

Europe’s Digital Markets Act, which will apply from May, aims to enhance competition in online services. Britain’s Digital Markets, Competition and Consumer Bill, also aimed at boosting competition in online services, is expected to come before lawmakers this year.

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