The UK Competition and Markets Authority (CMA) has released a report indicating that Microsoft and Amazon Web Services (AWS) are adversely affecting competition in the cloud computing market.

The CMA plans to further investigate whether AWS and Microsoft hold 'strategic market status' (SMS), which would enable targeted regulatory actions.

This potential investigation underscores growing concerns about the dominance of major tech companies in the cloud sector.

The report highlights that the cloud services market is highly concentrated, allowing these companies to exert significant unilateral market power and achieve returns that exceed their capital costs.

The CMA's findings suggest that the lack of competition in the £9 billion cloud market could lead to higher costs, reduced choices, and diminished innovation for UK businesses.

Currently, less than one percent of cloud customers switch providers annually, illustrating the entrenched market positions of these companies.

Concerns have been raised regarding practices such as egress fees and unfavorable licensing terms that create a 'lock-in' effect, complicating provider changes for businesses.

In response to the CMA's findings, Google has called for swift regulatory action to address licensing practices that hinder competition and harm customers.

The CMA's concerns arise during a period of heightened demand for cloud services, particularly those related to generative AI, prompting increased investments by major players.

Critics, including Civo CEO Mark Boost, argue that the CMA's regulatory response lacks the urgency needed to tackle the pressing issues identified in the market.

The CMA's investigation into granting strategic market status to Microsoft and AWS will not begin until 2026, as it is currently prioritizing similar actions for Google and Apple in the mobile sector.

Despite the CMA's concerns, Microsoft has reported significant growth in its Azure division, with revenues surpassing $75 billion annually.