Microsoft Rejects UK Competition Accusations in Cloud Market
Microsoft is disputing allegations from the U.K. Competition and Markets Authority (CMA) regarding its software licensing practices and their impact on cloud market competition. The company issued a detailed 101-page response last week to the CMA’s provisional decision, which followed a 15-month investigation into Microsoft, AWS, and Google Cloud.
The CMA’s provisional decision, issued in January, recommended that the agency designate Microsoft as a strategic technology provider, subjecting it to further intervention and investigation, under powers granted by the 2024 Digital Markets, Competition and Consumers Act. AWS was also recommended for similar designation.
Microsoft’s response strongly disagreed with these findings. “Current and future competition in the cloud simply does not and will not turn on the price of Microsoft’s legacy software,” the company stated. “Popular as it may be on PCs and on back-office servers, open-source software dominates the public cloud.”
CMA’s Findings and Microsoft’s Rebuttal
The CMA’s provisional findings indicated that the U.K. cloud market is “highly concentrated,” with AWS and Microsoft holding dominant positions. Microsoft raised several objections, criticizing the investigation’s methodology and conclusions, citing a lack of specialized knowledge and foresight. Microsoft’s response argued that the Provisional Decision Report “does not reflect how the cloud computing market operates in practice. Instead of following the evidence, it grounds much of its analysis in hypothetical scenarios and focuses on largely theoretical issues.”
To support its argument for a competitive market, Microsoft highlighted AWS’s market dominance, the recent gains of Google Cloud, and the emergence of Oracle’s infrastructure services business. These factors, according to Microsoft, demonstrate healthy competition among cloud providers.
Impact of Generative AI on the Cloud
Microsoft also emphasized the significant impact of generative AI technologies on the cloud market since regulatory scrutiny began. “Every technology market, including cloud computing, has been upended by the explosive emergence of generative AI, prompted by the launch of ChatGPT,” Microsoft said. The company pointed to multibillion-dollar investments by the major cloud providers to build out global AI compute capacity as further evidence of the competitive and rapidly evolving market, arguing that the CMA report “fundamentally misjudges” the extent to which AI technologies now steer the market for cloud.
Responses from AWS and Google Cloud
Both Google and AWS also filed responses to the CMA. AWS aligned with Microsoft, arguing the CMA report failed to acknowledge “a rapid pace of innovation, declining prices and fierce competition” in the cloud market, but AWS expressed approval for the report’s recommendations on software licensing requirements.
Google, however, took a considerably stronger stance towards Microsoft, encouraging the CMA to start regulatory action to change Microsoft’s software policies but avoiding any further action on data switching fees. Egress fees were reduced by AWS, Microsoft and Google last year. Microsoft criticized Google for its contradictory approach, “talking out of both sides of its corporate mouth… crowing about its growing market share even as it complains to regulators about constraints.”
