AWS and Microsoft Azure are in the spotlight, but perhaps not for the right reasons.
The European Commission has announced the initiation of three market investigations concerning cloud computing services under the landmark Digital Markets Act (DMA).
The move signals a major regulatory escalation, targeting the dominance of two of the world’s largest tech companies in a sector deemed crucial for Europe’s digital future and technological autonomy.
According to the EC’s announcement, two of the investigations will specifically assess whether the cloud computing services AWS and Microsoft Azure should be officially designated as “gatekeepers” under the DMA. This designation, even if the services do not currently meet the DMA’s standard quantitative thresholds for size, user number, and market position, would recognize them as controlling an important gateway between businesses and consumers.
The third, broader market investigation will examine the cloud computing sector overall to determine if the DMA’s current obligations are sufficient to ensure a fair and competitive environment. This process could lead to the update of DMA rules to better address fast-evolving practices within the industry.
The motivation behind the probe is rooted in the strategic importance of the cloud. As Executive Vice-President for Clean, Just and Competitive Transition, Teresa Ribera, stated, “Cloud computing services are vital for Europe’s competitiveness and resilience. We want this strategic sector to grow on fair, open, and competitive terms. That’s why today we are opening investigations into whether Amazon’s and Microsoft’s leading cloud computing services, Amazon Web Services and Microsoft Azure, should be subject to the DMA’s obligations.”
Implications of gatekeeper 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 gatekeepers.
A formal gatekeeper designation would compel these cloud services to comply with a rigorous set of DMA obligations designed to promote fairness and contestability. This includes rules against certain unfair practices, such as favoring their own services or limiting business users’ ability to switch providers.
The Commission is aiming to conclude these specific market investigations within 12 months. Should the designation criteria be met, Amazon and Microsoft would then have six months to ensure their cloud services are in full compliance with all relevant DMA rules.
Assessing market fairness
The Commission’s third investigation will focus on whether current practices in the cloud sector limit competitiveness and fairness, with the potential to result in changes to the DMA itself. The inquiry will scrutinize specific behaviors, including:
- Obstacles to Interoperability: Examining issues that make it difficult for different cloud services to work together seamlessly.
- Data Access: Looking at limited or conditioned access for business users to their own data.
- Tying and Bundling: Investigating practices where a cloud provider links multiple services together, potentially forcing users to take on unwanted products.
- Contractual Terms: Reviewing potentially imbalanced contractual clauses that favor the provider.
Broader context
Cloud computing provides the infrastructure — the storage, computing power, and networking — that forms the backbone for the vast majority of modern digital services, from streaming video to financial transactions, and is particularly crucial for the development and deployment of AI.
For the EU, fostering a competitive, open cloud market is a key element in its strategy for strategic autonomy, aiming to reduce reliance on non-European tech giants.
The ability of the Commission to designate gatekeepers even below the standard quantitative thresholds (size, user number) is a testament to the DMA’s focus on market power and control over an important market gateway.
When assessing this, the Commission considers factors such as network effects, scale and scope effects, and, crucially, lock-in and switching costs that make it hard for customers to leave a dominant provider.
Given the strong positions of AWS and Azure, which appear to control significant market share, the Commission is assessing whether these inherent features of the cloud sector — such as high data migration costs — effectively reinforce their market power and create unfair barriers for smaller competitors.
Should these companies be forced to open up their platforms, it could lower prices, stimulate innovation from smaller European cloud providers, and grant business users greater control over their data, ultimately fostering a more diverse digital ecosystem in Europe.
In other European news, the Eurosystem recently took another major step toward introducing a digital euro.
