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Amazon and Microsoft could face UK investigation over cloud services market

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Amazon and Microsoft are facing investigation by UK's competition watchdog for allegedly harming competition in the online cloud services market, amid "significant concerns" the two tech giants are abusing their positions.

The British communications regulator, Ofcom, said it was offering to refer the entire sector to the Competition and Markets Authority (CMA).

It added it was “particularly concerned about the practices of Amazon and Microsoft because of their market position”.

It said it had “significant concerns” after finding “behaviours by some providers that could raise barriers to switching and use of multiple providers”.

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Companies and other interested parties have until May 17 to respond to Ofcom's consultation.

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After this point the regulator will make a final judgement on whether to refer the sector to the CMA by October 5th.

The cloud services market has grown rapidly in the last decade to become a critical foundation for many of the world's largest websites and online services spanning from video streaming to mobile apps and government webpages.

This expansion has contributed to Amazon's and Microsoft's soaring worldwide profits.

According to Ofcom, Amazon Web Services (AWS) and Microsoft Azure control between 60 percent and 70 percent of the UK industry.

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 Alphabet's Google was the pair's closest rival, with between five percent and 10 percent of the UK market.

An inquiry into the cloud services sector would mean even more regulatory scrutiny of large tech firms in the UK.

The Financial Conduct Authority is investigating whether companies like Apple, Google, and Amazon could harm competition in the UK's financial services sector.

The CMA has previously stated it would strengthen its ability to investigate major tech companies through its digital markets section.

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It has powers to compel companies found to be distorting competition to change their business models.

The government plans to publish legislation this month giving the watchdog the authority to penalise companies up to 10 percent of their global turnover.

The CMA will also be able to ask for a ban on people acting as company directors in the UK under the digital markets, competition, and consumer bill.

Fergal Farragher, Ofcom’s director who carried out the study of the sector, said: “We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world.

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“High barriers to switching are already harming competition in what is a fast-growing market.”

Ofcom said it had found “reasonable grounds to suspect that there are features in the public cloud infrastructure services market that may have an adverse effect on competition in the UK”.

Those comprised exit fees, which charge companies to move their data to another cloud provider, restrictions on the capability of different platforms to work with each other, and discounts that could distort competition.

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Ofcom said in a statement: “These market features can make it difficult for some existing customers to bargain for a good deal with their provider.

“There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.”

Customers' ability to transfer providers, to use multiple providers at once, and for smaller providers to compete, according to Ofcom, are all allegedly made difficult by the alleged practises.

Microsoft and Amazon declared their intent to collaborate with Ofcom.

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An Amazon spokesperson said: “The UK has a thriving and diverse IT industry with customers able to choose between a wide variety of IT providers.”

The spokesperson said AWS gave customers “freedom to build the solution that is right for them, with the technology of their choice”, which had “driven increased competition across a range of sectors in the UK economy by broadening access to innovative, highly secure, and scalable IT services”.

A Microsoft spokesperson said: “We remain committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy.”

Source:   The Guardian

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