The Competition and Markets Authority (“CMA”) has published an update paper on the progress of its investigation into the cloud services market, launched in October last year (which we commented upon here).

The update explains that since the launch of the investigation the CMA has been involved in gathering a wide range of evidence to inform its analysis, including liaising with the main providers of cloud services in the UK as well as their customers. The update is accompanied by a working paper on the competitive landscape for cloud services in the UK which sets out analysis and evidence that will inform the CMA’s assessment of whether a cloud service provider holds significant market power. It indicates that the CMA’s ‘emerging view’ is that there are ‘indicators of significant market power’ being held by AWS and Microsoft because: (a) they both have high market shares whilst the collective share of all other providers in the markets is falling; (b) potential rivals face ‘significant barriers to entry and expansion’; and (c) the initial ‘profitability assessment’ of these companies suggests to the CMA that they have been generating returns above their cost of capital.

Also included in the update paper are detailed working papers on two of the ‘four theories of harm’ that the CMA is investigating: (1) egress fees, which are fees charged by providers to transfer customers’ data outside the provider’s infrastructure, and (2) committed spend agreements, which offer discounts so long as customers commit to a certain level of expenditure with the provider. In each case, the CMA is investigating whether these practices constitute barriers to using a multi-cloud architecture or to switching providers, and the working papers present the CMA’s initial analysis. Further working papers are expected to be published this month, including into technical barriers and software licensing practices by cloud services providers. An updated issues statement will also be published this month.

Looking further ahead, the CMA will hold hearings with AWS, Microsoft and Google, after which it will publish its provisional findings. This is expected to take place in September or October 2024, and the final decision will be made and published by the statutory deadline of 4 April 2025.

To read the update paper and various working papers from the CMA, click here.