GovWire

Ofcom has today referred the public cloud infrastructure services market to the Competition and Markets Authority (CMA) for an independent market investigation to further examine the market and consider whether there are competition concerns and, if so, what interventions can improve the supply of these important services for UK customers.

Cloud services allow remote access to computing resources on demand and over a network. They are being rapidly adopted by many businesses and have become an essential part of how many digital services are delivered to consumers. Ofcom has estimated that the market for cloud services in the UK was worth up to 7.5 billion in 2022.

In its market study, Ofcom identified a number of features in the supply of cloud services that make it more difficult for customers to switch and use multiple cloud suppliers.

The features which Ofcom is most concerned about are:

• Egress fees charges that cloud customers must pay to move their data out of the cloud
• Discounts which may incentivise customers to use only one cloud provider
• Technical barriers to switching which may prevent customers from being able to switch between different clouds or use more than one provider

Ofcoms report also outlines concerns it has heard about the software licensing practices of some cloud providers, in particular Microsoft.

Sarah Cardell, CEO of the CMA, said:

We welcome Ofcoms referral of public cloud infrastructure services to us for in-depth scrutiny. This is a 7.5bn market that underpins a whole host of online services from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.

Strong competition ensures a level playing field so that market power doesnt end up in the hands of a few players unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

The CMAs independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.

The CMA has appointed independent panel members to an inquiry group, who will act as the decision makers on this investigation. The group will publish an issues statement setting out the proposed focus of the CMAs investigation shortly for consultation.

In its 2023 to 2024 Annual Plan, the CMA outlined its areas of focus for the next three years, which includes ensuring effective competition in digital markets as a priority. The CMAs market investigation into cloud services will form an important part of its wider programme of work in digital markets including under the incoming Digital Markets, Competition and Consumer Bill.

TheCMAwill conclude its investigation by April 2025. For more information visit the Cloud Services Market Investigation case page.

Note to editors:

1. The CMAs issues statement will outline initial theories of harm on what might be adversely affecting competition and potential remedies that may be suitable to address any adverse effects on competition or any detrimental effect on customers that the CMA may find. It will not set out findings or conclusions. Parties will be invited to provide submissions commenting on the issues and potential remedies.

2. A market investigation by the CMA is an in-depth investigation led by a group of CMA panel members. The CMA must generally conclude a market investigation within 18 months from the date that the reference is made. Market investigations consider whether there are features of a market that have an adverse effect on competition (AEC). If there is an AEC, the CMA has the power to impose its own remedies on businesses and it can also make recommendations to other bodies such as sectoral regulators or the government when legislation might be required for example. The CMA can compel firms to change behaviour, such as the way a product is sold in a particular market and the information that is available to customers buying that product. The CMA also has the power to impose structural remedies which can require companies to sell parts of their business to improve competition.

3. Guidance on the CMAs approach to market investigations can be found here.

4. All media enquiries should be directed to the CMA press office by email on press@cma.gov.uk or by phone on 020

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