Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) Web Services could come under scrutiny from U.K. regulators after an independent investigation found a lack of competition in the cloud-services market.
What To Know: The U.K. Competition and Markets Authority (CMA) announced Tuesday that an investigation provisionally found that low competition for cloud services could drive prices higher and result in less choice for consumers, according to a Wall Street Journal report.
The report indicates that the independent investigation is also concerned about less innovation and lower quality of service in the space as Microsoft and Amazon each have about 40% share of the cloud-services market.
The group reportedly found that there are “significant barriers to entry and expansion in cloud services” for newer market entrants, while larger more established companies experience lower costs as a result of scale.
"Our provisional view is that competition in this market is not working as well as it could be. So, we propose that the CMA considers investigating the largest cloud service providers using its new digital markets powers," said Kip Meek, chair of the CMA's independent inquiry group.
A final decision on market conditions as it relates to competition is reportedly expected by Aug. 4.
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The current CMA regime came into force less than a month ago. The U.K. has new rules that allow antitrust officials to identify companies with strategic digital market status and impose conduct requirements related to fair competition.
Microsoft's corporate vice president and deputy counsel for competition law, Rima Alaily, reportedly said the CMA's report should be centered on creating a path for the U.K.'s AI-powered future, not focused on legacy products.
A spokesperson for Amazon Web Services reportedly called a potential investigation “unwarranted” and refuted claims that the cloud-services sector lacks competition.
"We welcome the CMA's updated finding that customer discounts do not harm competition, but we urge the CMA to carefully consider how regulatory intervention in other areas will stifle innovation and ultimately harm customers in the U.K.," the AWS spokesperson reportedly said.
MSFT, AMZN Price Action: At publication time, Microsoft shares were up 2.59% at $445.81 and Amazon shares were up 1.72% at $239.42, according to Benzinga Pro.
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