In an extraordinary decision by the UK government, the head of the politically independent Competition and Markets Authority (“CMA”), Marcus Bokkerink, was sacked in late January 2025. The business secretary Josh Reynolds linked the dismissal with “a plan for change” designed to “supercharg[e] the economy with pro-business decisions that will drive prosperity and growth, putting more money in people’s pockets.”UK business leaders had directed numerous complaints about the overly interventionist approach the CMA had turned to under Mr. Bokkerink and apparently government ministers had been listening.
A week later the CMA released a report, seemingly contradicting this newfound ethos, recommending the government intervene in the cloud services market with new regulations. Though the findings were provisional, and the recommendations only loosely defined, the conclusions were clear, current market outcomes are suboptimal, and had been for years. Even though the report was initiated under Bokkerink’s watch, the committee undertaking the analysis was independent, and early signals indicate the CMA has every intention with continuing their investigation. One might wonder, despite Mr. Bokkerink’s dismissal, that this means the CMA will continue its interventionist agenda or whether it will ultimately align with the business secretary’s more hands-off approach. This piece, however, will not make any conjecture on that matter, it will instead summarize the report’s findings and comment on whether any intervention advocated in the report should be taken and what issues the CMA should consider and prioritize in its subsequent investigation.
On the 6th of November 2023, the United Kingdom’s Office of Communication (commonly referred to as “Ofcom”) released a lengthy report on the competitive state of the country’s cloud services market.The conclusion was succinct, though consumers are deriving benefits from the market, “competition is not working well.”
However, the rise of AI has further reshaped the cloud market since Ofcom’s initial referral nearly three years ago, a factor Microsoft emphasizes as transformative. The CMA’s exclusion of AI-driven accelerated compute from its analysis overlooks a critical shift: AI has spurred massive investments and accelerated growth, with incumbents and new entrants alike—such as Oracle, Nvidia, and AI startups—pivoting to meet evolving customer demands. This dynamism undermines the relevance of the CMA’s focus on legacy products and historical concerns, suggesting that the market has outpaced the inquiry’s original framing.
Moreover, Google’s significant growth and advantages in the AI-driven cloud landscape, including its market capitalization, proprietary AI chips, global datacenter network, and vast data resources from consumer services. Google’s increasing cloud revenue and market share reflect a competitive market where innovation, not licensing costs, drives success. This challenges the CMA’s portrayal of Microsoft’s practices as a dominant barrier to competition, indicating a more balanced and contested market than suggested.
The CMA’s provisional recommendation to investigate AWS and Microsoft under the Digital Markets, Competition and Consumers Act (DMCC) for potential Strategic Market Status (SMS) designation raises concerns about over-intervention. Such actions could threaten the UK’s competitive edge in the global digital economy, potentially pushing businesses to relocate digital activities to less regulated markets. The cloud services industry’s global nature amplifies these risks, as heavy-handed regulation might deter investment and innovation at a time when the UK seeks to capitalize on AI advancements.
A cautious, evidence-based approach to regulation is warranted. Targeted measures, such as reducing egress fees to ease switching, could address specific barriers without disrupting the market’s vitality. Broader interventions, however, like altering licensing practices or mandating standardization, risk unintended consequences given the market’s current benefits—deflationary pricing, AI-driven innovation, and expanding provider options. The CMA itself acknowledges the “material risks” of using its remedy-making powers, reinforcing the need for precision over expansive action.
Ultimately, while the CMA’s concerns merit consideration, the cloud services market’s competitive dynamics are delivering tangible advantages to UK consumers and businesses. A thriving ecosystem has evolved significantly since the inquiry began, driven by competition and technological progress. Regulatory efforts should prioritize preserving these strengths, focusing only on well-substantiated barriers, to ensure the UK remains a leader in the global digital economy.
