NextFin News - The UK Competition and Markets Authority (CMA) has declined to launch a Strategic Market Status (SMS) investigation into the cloud services market, opting instead to accept voluntary concessions from Amazon and Microsoft. The decision, announced on March 31, 2026, marks a significant pivot in the regulator’s approach to the Digital Markets, Competition and Consumers Act (DMCCA), choosing to resolve long-standing concerns over egress fees and interoperability through negotiation rather than the heavy-handed ex-ante regulation permitted under its new powers.
While the cloud sector escaped the most stringent tier of the DMCCA, the CMA simultaneously opened a formal SMS investigation into Microsoft’s business software ecosystem. This dual-track strategy suggests the regulator is prioritizing legacy software dominance and AI integration over the underlying infrastructure of the cloud. The CMA stated that the actions proposed by Amazon Web Services (AWS) and Microsoft regarding data transfer costs and technical barriers were sufficient to address the primary competition concerns identified during its multi-year market investigation, which concluded in 2025.
Joseph Coniglio, senior counsel and director of antitrust and innovation policy at the Information Technology and Innovation Foundation (ITIF), characterized the decision as a "prudent exercise of authority." Coniglio, whose organization is known for advocating for light-touch regulation and supporting the competitive interests of U.S. technology firms, argued that cloud markets are too dynamic for the rigid oversight of the DMCCA. He noted that the CMA’s reliance on existing antitrust frameworks for cloud services proves that the UK’s traditional laws remain robust enough to protect consumers without stifling investment.
However, Coniglio’s perspective is not universally shared among competition advocates. Critics of the decision argue that by forgoing an SMS designation for cloud providers, the CMA may be losing its best opportunity to prevent "vendor lock-in" before it becomes irreversible. The ITIF’s stance, while influential in Washington and London, often reflects a pro-innovation bias that prioritizes the growth of market leaders over the potential entry of smaller competitors. Coniglio himself has frequently criticized the DMCCA as a potential trade barrier targeting American companies, a view that aligns with broader U.S. industry concerns but contrasts with the CMA’s mandate to ensure domestic market contestability.
The divergence in the CMA’s treatment of cloud services versus business software highlights a specific regulatory focus on the "productivity suite" as the next major antitrust battleground. By targeting Microsoft’s Windows, Office, and Teams ecosystem—and specifically the integration of its Copilot AI—the CMA is signaling that it views the bundling of software and artificial intelligence as a greater threat to competition than the concentration of cloud infrastructure. This move places the UK at the forefront of global efforts to regulate how Big Tech leverages existing software monopolies to dominate the emerging AI sector.
For Amazon and Microsoft, the cloud settlement provides a degree of regulatory certainty in one of their most profitable business segments. The removal of egress fees—the costs charged to customers for moving data out of a provider’s cloud—has been a central demand from UK businesses and government agencies. By addressing these "friction points" voluntarily, the providers have avoided the more intrusive "conduct requirements" that an SMS designation would have triggered, such as mandatory data sharing or restrictions on self-preferencing.
The decision also carries geopolitical weight. U.S. President Trump’s administration has consistently pushed back against European digital regulations that disproportionately affect American firms. The CMA’s decision to spare the cloud sector from SMS status may be seen as a tactical de-escalation, even as the new investigation into Microsoft’s software ensures that the regulator maintains its "tough on tech" stance. The outcome of the business software probe, scheduled to commence in May, will likely determine whether the UK’s post-Brexit regulatory regime is viewed as a flexible partner to innovation or a persistent hurdle for global technology giants.
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