AWS and Microsoft Azure are in the spotlight, but perhaps not for the right reasons.
The European Commission has announced the launch of three market investigations into cloud computing services under the landmark Digital Markets Act (DMA).
The move signals a major regulatory escalation aimed at the dominance of the world’s two largest technology companies in a sector seen as key to Europe’s digital future and technological autonomy.
According to the EC’s announcement, two of the investigations will specifically assess whether cloud computing services AWS and Microsoft Azure should be officially designated as “gatekeepers” under the DMA. This designation, even though the services currently do not meet the DMA’s standard quantitative limits for size, number of users, and market position, would consider them to be managing an important gateway between businesses and consumers.
A third, broader market survey will examine the entire cloud computing sector to determine whether current DMA commitments are sufficient to ensure a fair and competitive environment. This process could lead to an update of the DMA rules to better address rapidly evolving practices in the industry.
The motivation behind the probe is rooted in the strategic importance of the cloud. As executive vice president for a clean, fair and competitive transition, Teresa Ribera said: “Cloud computing services are vital for European competitiveness and resilience. We want this strategic industry to grow under fair, open and competitive conditions. That’s why today we are launching an investigation into whether Amazon and Microsoft’s leading cloud services, Amazon Web Services, should be subject to Amazon and Microsoft Azure’s commitments to the DMA and Microsoft.”
Consequences of porter designation
If the Commission’s investigation concludes that AWS and Microsoft Azure qualify as important gateways, they would be added to the list of “core platform services” for which their parent companies, Amazon and Microsoft, are already designated as gateway operators.
A formal gatekeeper designation would force these cloud services to adhere to a strict set of DMA obligations designed to promote fairness and competition. This includes rules against certain unfair practices, such as favoring their own services or restricting the ability of business users to switch providers.
The Commission aims to conclude these specific market investigations within 12 months. If the designation criteria were met, Amazon and Microsoft would then have six months to ensure that their cloud services are fully compliant with all relevant DMA rules.
Assessing market fairness
The Commission’s third inquiry will focus on whether current practices in the cloud sector limit competitiveness and fairness, with the potential to lead to changes to the DMA itself. The survey will examine specific behaviors including:
- Barriers to Interoperability: Exploring the issues that make it difficult for different cloud services to work together seamlessly.
- Data access: A view of limited or conditional access of business users to their own data.
- Tying and bundling: Investigating practices where a cloud provider bundles multiple services together, potentially forcing users to take unwanted products.
- Contract Terms: Review of potentially unbalanced contract clauses that favor providers.
Broader context
Cloud computing provides the infrastructure—storage, computing power, and networking—that forms the backbone of the vast majority of modern digital services, from video streaming to financial transactions, and is particularly critical to the development and deployment of AI.
For the EU, promoting a competitive open cloud market is a key element of its strategic autonomy strategy, which aims to reduce dependence on non-European technology giants.
The Commission’s ability to appoint gatekeepers even below the standard quantitative thresholds (size, number of users) is evidence of the DMA’s focus on market power and control over an important market gate.
In making this assessment, the Commission takes into account factors such as network effects, scope and scale effects and, in particular, lock-in and switching costs that make it difficult for customers to leave a dominant provider.
Given the strong position of AWS and Azure, which appear to control a significant market share, the Commission is assessing whether these inherent characteristics of the cloud sector – such as the high cost of data migration – effectively strengthen their market power and create unfair barriers to smaller competitors.
If these companies were forced to open up their platforms, it could lower prices, stimulate innovation from smaller European cloud providers and give business users more control over their data, ultimately fostering a more diverse digital ecosystem in Europe.
In other European news, the Eurosystem recently took another major step towards the introduction of the digital euro.