The Competition and Markets Authority (CMA) has provisionally found that Microsoft’s software licensing practices are harming competition in the £9 billion ($11.2 billion) U.K. cloud computing market, potentially justifying regulatory sanctions. The CMA’s inquiry group said Tuesday that Microsoft charges higher licensing fees for rival cloud providers like Amazon Web Services (AWS) and Google Cloud compared to its own facilities, disadvantaging competitors and limiting consumer choice.

Microsoft’s Practices Under Scrutiny

According to the inquiry group, Microsoft has the "ability and incentive to partially foreclose" competitors like Amazon and Google by leveraging its dominance in essential software products such as Windows 11 and Visual Studio. The group stated that this conduct harms competition, making it harder for alternative cloud providers to enter the market or scale their operations.

The CMA pointed to the high market concentration in the U.K. cloud services sector, where Microsoft and Amazon dominate, followed by Google in a distant third. This concentration, coupled with significant barriers to entry, leaves customers with limited options, the group said.

Regulatory Recommendations

To address the competitive imbalance, the inquiry group urged the CMA to exercise its authority under the Digital Markets, Competition and Consumers Act 2024. This could include designating Microsoft and AWS as having strategic market status (SMS), which would empower the CMA to enforce legally binding pro-competition interventions and conduct requirements.

Microsoft’s Response

Microsoft dismissed the CMA’s findings as backward-looking, focusing on what it described as "legacy products launched in the last century." Rima Alaily, corporate vice president and deputy general counsel for Microsoft’s competition law group, argued that the cloud computing market remains dynamic and competitive, benefiting from billions in investment and innovation.

"The cloud computing market has never been so dynamic and competitive," Alaily said, emphasizing the potential for AI-driven growth in the U.K.

Reactions from Rivals

• Amazon questioned the need for regulatory intervention, warning that it could stifle innovation and harm customers.
• Google Cloud, in contrast, welcomed the CMA’s stance, with Vice President Chris Lindsay stating that restrictive licensing practices "threaten economic growth and stifle innovation."

Related Litigation

Microsoft is already defending a £2 billion claim at the Competition Appeal Tribunal over allegedly abusive licensing fees for its Windows Server product, widely used in cloud computing. Competition lawyer and class representative Maria Luisa Stasi praised the CMA’s provisional findings, asserting that "Microsoft has already overcharged businesses for years."