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Microsoft has accused the UK’s antitrust regulator of “looking backwards” by ignoring how artificial intelligence is reshaping the technology industry, in its response to the agency’s investigation into the £9bn UK cloud computing market.
The Competition and Markets Authority said in January that Microsoft was “using its strong position in software to make it harder for Amazon Web Services and Google to compete effectively”, in its provisional decision after a lengthy probe into the sector.
However, despite huge investments from big tech companies to build out AI infrastructure, the CMA said it currently saw “no significant direct impact” from AI on competition in the traditional cloud market.
In a 56-page response published on Friday, Microsoft called the CMA’s position on AI a “fundamental mistake”, given how important the technology was becoming to corporate customers.
“There is a real danger that intervening in the market based on these misunderstandings will backfire, leaving the UK with the opposite of the CMA’s goal of a healthy, well-functioning market, rich in growth and investment,” it said.
Big tech companies are investing hundreds of billions of dollars to build out so-called accelerated computing systems that are capable of training and delivering large language models such as those that power Google’s Gemini and OpenAI’s ChatGPT.
Microsoft’s criticism comes as the CMA has faced intense scrutiny in recent months, coming under pressure from the government to show it is promoting growth and not stifling innovation in the UK. Ministers abruptly ousted the agency’s chair Marcus Bokkerink last month, replacing him with the former head of Amazon UK, Doug Gurr.
Microsoft said the CMA’s provisional decision “does not reflect how the cloud computing market operates in practice”, arguing that UK customers had raised “limited concerns” about competition in the industry.
The UK antitrust regulator has also begun to consider whether Amazon and Microsoft should receive extra oversight under the UK’s new digital markets regime by deeming them as having “strategic market status” in the cloud industry.
Microsoft said that by excluding Google from that consideration, as well as other potential interventions following the market study, the CMA might end up intervening “to enable Google’s growth in the UK market by softening competition from its competitors”, despite the search giant’s rapid growth in cloud.
Microsoft’s Azure and Amazon Web Services dominate the global cloud computing industry, each with a share of up to 40 per cent of UK customer spending, with Google Cloud generally seen as coming in a distant third.
In response, the CMA on Friday said: “The cloud market investigation has considered the impact of AI on competition in the cloud services market. The group is analysing all the feedback it has received so far — including responses from Microsoft and others — and is yet to make a final decision.”
The UK’s cloud services investigation began when the media and communications regulator Ofcom opened a market study in October 2022, referring it to the CMA a year later.
The CMA inquiry group said a general lack of competition was interfering with customers’ ability “to switch cloud provider or use multiple clouds, which may ultimately impact the price and quality of cloud services”.
