US and UK Regulators Are Going After Amazon And Microsoft

On September 26th, the Federal Trade Commission went into action to stop the monopoly power of Amazon.com Inc AMZN by filing a long-awaited antitrust suit. The case was filed in conjunction with seventeen states, accusing the e-commerce titan of using its online retail dominance to suppress competition. On Thursday, UK’s media regulator asked the country's antitrust authority to investigate both Amazon and Microsoft Corporation MSFT regarding their dominance of the UK cloud market.

The FTC Finally Went After Amazon

The case FTC made has several aspects. FTC wants Amazon to make structural changes to its business. Secondly, FTC aims to free sellers from the pressure Amazon places on them for using its own fulfillment service when listing their products under Amazon Prime. The governments finds that with this move, Amazon is unfairly advantaging its own warehousing and shipping services because sellers cannot choose a different option if they want full access to Amazon’s enormous base of potential consumers. The FTC also argues that this prevents other delivery-fulfillment-service companies from growing and developing their customer base. 

The Cloud Battle

According to Ofcom, Amazon Web Services and Microsoft together held 70-80% share of Britain's public cloud infrastructure services market last year, with their closest competitor being Alphabet Inc GOOG Google with a 5 to 10% share. With AWS cloud solutions, Amazon is primarily targeting startups, while Microsoft has its eyes set on big enterprises. Ofcom estimates that Amazon, Microsoft and Google generate roughly 81% of revenues in the U.K.’s cloud infrastructure services market that is estimated to be worth $18.2 billion.

Back in April, Ofcom expressed its concern about the competitive practices of the so-called “hyperscalers” like Amazon Web Services and Microsoft Azure. Fergal Farragher, Ofcom’s director responsible for the market study, stated that UK businesses went to Ofcom to express their concern with the difficulties to switch and mix cloud providers. 

On Thursday, the media watchdog kickstarted the investigation by bringing its inquiry to the Competition and Markets Authority. The CMA is due to complete its investigation by April 2025, stating that it is of essential importance to ensure fair competition in this $9.1 billion market.

Lack Of Team Spirit       

According to the regulator, the ‘exit’ fees that cloud vendors like Amazon and Microsoft charge make it harder for clients to change providers users or simply use more than one. However, Amazon AWS spokesperson responded that Amazon does not charge separate fees for switching data to another provider, adding that more than 90% of customers pay nothing for the transfer of data as they are entitled to 100 free gigabytes per month. 

But Ofcom also claims that cloud providers installed technical barriers to using several cloud platforms and services, making it impossible to work together and exchange data without disruption. Also, Ofcom warned that discount incentives provided to customers who spend a certain amount of money also encourages consumer to use a single cloud provider, even if there’s a cheaper alternative on the market. 

Google is among cloud firms who complained about Microsoft locking in users

Google is among the cloud firms who expressed their concern that with unfair licensing terms of Azure, Microsoft gets to lock in users. Commenting on Ofcom’s referral, Google Vice President Amit Zavery addressed the need for the cloud market to be open and without vendors locking in users that should be able to freely choose the provider whose offerings meet their needs best, adding that Google will continue to allow its products to run on any cloud without penalty. But even Google is defending itself against accusations of making anticompetitive deals to remain the world’s dominant search engine. Google’s defense to the claims made by the Justice Department consists of arguing that consumers simply prefer its search engine over others that are available.

European Regulators Are Also Closely Looking At Cloud Computing 

Amazon did state it disagrees with Ofcom, citing that its findings are based on a fundamental misconception of how the sector functions, as well as of its services and discounts, but both Amazon and Microsoft stated that they will engage constructively with the CMA. Back in June, French antitrust authorities also flagged various practices that could potentially restrict competition, stating that they could pave the way for future investigations. Microsoft has been under the radar of EU antitrust regulators due to a complaint by Cloud Infrastructure Services Providers in Europe, a trade group who also has Amazon as one of its members. 

As the above cases show, regulators across the globe are looking at ways to reduce the concentration of economic power in several industries, specifically the tech sector which is not only shaping our everyday lives but also holds great power in terms of owning enormous amounts of personal and corporate data.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.