Cloud services are attracting increasing attention from regulators globally, which is set to ramp up with further adoption of emerging technologies
The CNMC has already identified potential competition issues
On 23 November 2023, the Comisión Nacional de los Mercados y la Competencia (CNMC) announced the launch of a market study into cloud services. The regulator notes that over 30% of businesses in Spain already employ cloud services, which will be a key enabler of digital transformation. Without naming any particular firms as the focus of its investigation, the CNMC’s preliminary analysis has identified potential concerns with the concentration of the market around only a few providers, as well as with difficulties in changing cloud suppliers. This study aligns with the focus on digitisation set out in the regulator’s 2023 Action Plan, which also describes an ambition to address other tech-focused competition concerns, including algorithmic collusion on pricing.
Spain is the fourth European country to investigate cloud services
Several other regulators have investigated or are currently investigating the cloud market. In October, the UK’s Competition and Markets Authority launched an investigation following a referral from Ofcom. Other initiatives include:
The Authority for Consumers and Markets in the Netherlands launched a cloud market investigation in preparation for the EU’s work on the Data Act;
The Autorité de la concurrence in France linked consolidation in the cloud market to the potential for further anti-competitive practices in emerging markets like edge computing and large language models;
Both the Treasury Department and the Federal Trade Commission in the US have focused on the risks cloud consolidation pose to critical sectors like finance;
The Korea Fair Trade Commission investigated the issues of interoperability and switching in the context of a market dominated by Amazon; and
The Japan Fair Trade Commission closed their report on the cloud market with a promise to promote global coordination through organisations such as the OECD and the International Competition Network.
As many of these investigations cite concerns with the dominance of a select few hyperscalers, firms like Microsoft, Amazon and Google can expect continued scrutiny from regulators, especially on their policies regarding the ease of switching providers and committed spend discounting.
Market concentration presents concerns in light of emerging technologies
As discussed in the Autorité de la concurrence report on cloud markets, the concentration of providers is uniquely troubling when considered in tandem with the data-heavy industries of emerging technologies like AI and edge computing. Hyperscalers are investing heavily in AI and stand to gain large amounts of cloud business from the immense data loads generated by the technology. Regulators therefore seem particularly keen on addressing the potential competition issues that might stem from highly concentrated cloud markets in advance of the widespread adoption of AI. With cloud computing providers so far absent from the EC’s ‘gatekeeper’ designations under the Digital Markets Act, European regulators – including in France and the Netherlands – are currently looking towards the implementation of the Data Act as a way of driving competition among cloud firms.
