US tech giant Microsoft has warned the UK’s Competition and Markets Authority (CMA) it is taking “a step in the wrong direction” by opening another probe into the firm’s provision of cloud services to UK customers.

In January, the CMA published provisional findings of an investigation aimed at assessing competition in the UK’s cloud services market. It said Microsoft, along with Amazon, had established a market hegemony in the UK’s cloud services, leaving little room for others to compete.

The CMA’s report also said “competition is not working as well as it could be, which is likely to be leading to higher costs, less choice, less innovation and lower quality of service for businesses and organisations across the UK economy.”

Data out of sync

But in a detailed response, Microsoft said “much of the data underpinning this market investigation is already out-dated, outpaced by the speed of cloud and AI innovation, and largely out of sync with the real forces shaping this industry today.

“Microsoft believes that starting a third investigation – under the new Digital Markets, Competition and Consumers Act 2024 (“DMCC”) – in relation to cloud computing after 30+ months of consideration by Ofcom, first, and the CMA, now, is a step in the wrong direction.”

The global tech giant has also warned the UK competition watchdog not to intervene “in a fast-evolving market on rapidly shifting sands”, or else the UK’s cloud computing market will become the most regulated in the world.

The core message of Microsoft’s 101-page response is based around the argument that artificial intelligence is rapidly reshaping the technology industry, and that the CMA’s investigation has not taken this factor into account.

But in response the CMA was quoted by the FT saying: “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.” 

How we got here

In October 2022, another UK regulator, Ofcom, announced the launch of its market study into the provision of cloud services in the UK. A year later, it asked the CMA to look into the state of competition in the UK’s cloud services markets.

In October 2023, the CMA said it “will explore whether technical barriers, fees to transfer data, volume discounts and software licensing practices are hindering competition in cloud services” in the UK.

In January 2025, the CMA published the provisional findings of its investigation into the UK cloud services markets, and said it had “provisionally found competition concerns in these markets.”

Microsoft and Amazon were criticized in the report for holding a market hegemony in the cloud services sector. The CMA gave a deadline of February 18, 2025, for responses to its provisional findings.

Microsoft’s response has now been submitted. In it, the tech giant has said it “disagrees with substantial portion” of the CMA’s provisional findings.

“It does not reflect how the cloud computing market operates in practice. Instead of following the evidence, it grounds much of its analysis in hypothetical scenarios and focuses on largely theoretical issues,” Microsoft said.

Change of tone

In recent weeks, there has been a clear change of tone from the CMA in relation to its dealing with global tech giants, partly due to pressure from the UK and US governments.

In February, Sarah Cardell, the chief executive of the CMA, said she would try to “engage” with US tech giants as the agency investigates UK market practices of firms such as Google, Microsoft, Amazon and Apple.

And last week, she said that, in future, the regulator will interfere in fewer global deals than it has done in previous years. She was referring to a historical stand-off of global financial significance between the watchdog and US tech giants.

In August 2023, the CMA stopped Microsoft from acquiring an interest in Activision Blizzard for 10 years without prior consent from the regulator. That deal, reportedly worth $68.7 billion, eventually went through.

The CMA and other UK regulators have faced constant criticism and pressure from the UK government and the industry in recent months.

Last month, the government announced its new Draft Strategic Steer to the CMA, asking the competition watchdog to cut unnecessary regulation and focus more on economic growth.