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CMA to launch strategic market status investigation into Microsoft; Amazon Web Services off the hook
CMA to investigate whether Microsoft should be given strategic market status. Amazon escaped, but both companies will need to make changes to egress fees and interoperability
The Competition and Markets Authority (CMA) has announced it will launch a strategic market status (SMS) investigation into Microsoft’s business software ecosystem in May 2026 to address concerns about the company’s licensing putting restrictions on competition in the cloud.
At the same time, the CMA announced that following engagement with Amazon Web Services (AWS) and Microsoft, the two companies have agreed to make changes to cloud egress fees and product interoperability.
Microsoft and AWS had been the subject of the CMA’s “cloud services market investigation”, which started last July and could have seen both companies designated with SMS.
The SMS designation investigation will last nine months. It will target concerns that Microsoft uses its dominant position in software (like Windows Server and SQL Server) to limit competition in the cloud market by making it more expensive or difficult to host these products on rival platforms such as AWS or Google Cloud.
Meanwhile, AWS and Microsoft have agreed to take steps to remove or reduce egress fees – the cost of moving data out of a cloud provider – and improve multi-cloud interoperability, with changes implemented through contract updates. The CMA board will review progress on these “in six months”.
Microsoft and AWS have about 40% of the UK cloud market each, while Google Cloud comes some way behind with 10%.
The CMA stated that while they are keeping all players under review, the specific issues regarding software licensing leverage were unique to Microsoft’s position, and that was why it was the only one subject to potential SMS designation.
Read more about the cloud services market
- The CMA anti-trust investigation into AWS and Microsoft explained: Everything you need to know: After regulator Ofcom raised red flags about the anti-competitive behaviour of Amazon Web Services and Microsoft, the UK cloud market was referred to the Competition and Markets Authority – here’s why
- UK competition regulator looks into Google’s AI search: The CMA has proposed a number of steps to ensure publishers are treated fairly by search engine giant Google in regards to its AI Overview function.
The CMA believes a major driver to act now is the rapid emergence of generative artificial intelligence (GenAI) and agentic AI tools. It says the market is currently open, but risks becoming closed if Microsoft’s ecosystem doesn’t allow for seamless interoperability with third-party AI innovators.
Almost simultaneously with the CMA publicising its decision, AWS announced “a new UK addendum” that aims to formalise a commitment to customer choice around multi-cloud adoption, data portability and switching processes.
Not long after that, Microsoft published a blog post in which it set out its commitments to implementing changes set out by the CMA, and detailed measures taken in the areas of multi-cloud interoperability and data egress fees.
The CMA decision was broadly welcomed, but with reservations over just how much “bite” the measures would have, and concerns that outcomes would be rigorously monitored.
What they said
Nicky Stewart, senior adviser to the Open Cloud Coalition:
“We welcome this further recognition from the CMA that unfair software licensing practices have broken the cloud market. The SMS investigation into Microsoft’s business software ecosystem must proceed without delay. We also urge the CMA to take swift action should Microsoft and AWS fail to meet their commitments on egress fees and interoperability, and to ensure those commitments are meaningful. Slow progress on these issues continues to hamper growth, innovation and resilience in the UK cloud marketplace.”
Bill McCluggage, director of IT strategy and policy in the Cabinet Office and deputy government CIO from 2009 to 2012:
“The CMA’s latest announcement signals intent, but not urgency. While an SMS investigation into Microsoft’s ecosystem and cloud licensing is welcome in principle, it risks becoming another procedural delay rather than decisive intervention. In the meantime, the dominance of Microsoft and AWS continues to solidify, with limited evidence that pricing or meaningful customer choice will improve.
“Commitments on interoperability and egress are encouraging but lack transparency and immediacy. Without faster, firmer action, the outcome may simply reinforce the current duopoly, leaving UK businesses and the public sector exposed to long-term lock-in rather than genuine competition.”
Owen Sayers, an independent consultant with decades of experience in delivering public sector IT:
“The detailed undertakings from [AWS and Microsoft] suggest they’re taking this opportunity seriously, but a side by side comparison suggests that AWS are doing so more quickly than Microsoft. This may reflect the different technology landscape, where AWS are more likely able to meet the CMA required actions, such as opening up interconnectivity to GCP.
“The biggest takeaway from this on the first reading is the SMS investigation into Microsoft’s Business Software ecosystem. This suggests that the SMS will extend beyond just their cloud practices to their whole stack, which of course it should.
“Microsoft makes no clear distinction between cloud and desktop or on-premises services, and for many years have used – and some would say abused – their near-total monopoly of desktop, personal computer and enterprise products to build their cloud adoption pathway. Any CMA SMS investigation worthy of the name needs to look at the entirety of their delivery landscape, which the term ‘ecosystem’ suggests might now be what they will undertake.”
Statement from Cloud Infrastructure Service Providers in Europe (Cispe):
“It is good to finally see the CMA’s report, although as they admit, the market has moved on since the investigation was opened five years ago. Cispe’s complaint, negotiation and ultimate agreement with Microsoft delivered far more concrete solutions for European Cloud Infrastructure Service Providers, far faster. As an example, just last week, we achieved parity in ESU [Extended Security Updates] pricing between Microsoft software running on Azure and on other clouds.”
Kevin Dunn, vice-president and general manager for EMEA at cloud provider Wasabi Technologies:
“The CMA’s decision is a decisive step toward tackling long-standing barriers like complex and unpredictable pricing, high fees and contractual lock-in that limit customer choice. Cost predictability is fundamental to cloud economics, yet our data shows 46% of UK businesses have overspent their cloud budgets in the last year.
“We look forward to understanding how the CMA will deliver the targeted remedies that improve transparency, and create a more competitive, customer-first cloud market.”
Mark Boost, CEO at UK sovereign cloud provider Civo:
“The decision made by CMA to investigate Microsoft is encouraging, but the decision to exclude AWS raises practical concerns with both providers being structured in the same way from a structural lock-in perspective, which could create a regulatory imbalance between the two parties that would keep one side unchallenged.
“The actions proposed in Point 33 [detailed requirement regarding egress fees, multi-cloud, etc.] provide evidence of the desire to address such market imbalances. However, it is important ambition is met by additional, enforceable measures being implemented. Voluntary arrangements made with parties outside of the SMS framework will not provide real impact, and by delaying its final decision regarding Microsoft and excluding AWS altogether, there is a risk for CMA to unnecessarily prolong uncertainty and miss an opportunity to future-proof the UK’s digital infrastructure.”
