The Competition and Markets Authority is preparing to open a Strategic Market Status investigation into Amazon Web Services and Microsoft Azure within weeks, according to City competition lawyers tracking the regulator’s pipeline — a step that would extend Britain’s new digital-markets regime to the cloud infrastructure underpinning swathes of UK finance, government and artificial intelligence.
The CMA has not formally announced the probe, but officials at its Digital Markets Unit have signalled that cloud services are the natural next target after Apple’s and Google’s mobile ecosystems, and Google Search, were taken into SMS investigations during the first quarter of 2025. The Authority’s August 2025 cloud market investigation final report concluded that both hyperscalers held positions of strength leading to an adverse effect on competition; the question now is which of those concerns can be addressed under the Digital Markets, Competition and Consumers Act 2024 rather than the older market-investigation toolkit.
From market investigation to SMS regime
The DMCC Act, which came into force on 1 January 2025, gives the CMA authority to designate firms with Strategic Market Status in respect of a digital activity once they exceed £25 billion in global turnover or £1 billion in UK turnover and meet a substantial-and-entrenched-market-power test. Designations trigger bespoke conduct requirements — binding rules tailored to the firm and the activity — alongside pro-competition interventions where structural change is needed.
A formal SMS investigation runs for nine months, with a possible three-month extension. For cloud, the Authority is expected to scope around three behaviours flagged in the market investigation: egress fees that penalise customers for moving data out of a hyperscaler, software-licensing practices that effectively tie Microsoft 365 and Windows Server pricing to use of Azure, and committed-spend agreements that lock in long-term customer relationships. People familiar with the regulator’s thinking say interoperability and portability obligations will form the spine of any conduct requirements.
City exposure under the spotlight
The investigation lands as Threadneedle Street, the FCA and the Treasury Committee have all singled out cloud concentration as a systemic concern. The Bank of England’s April 2026 Financial Policy Committee record described provider concentration as one of two strands of its bespoke AI scenario analysis, alongside herding in agentic trading. UK Finance, the trade body, has previously estimated that more than 70 per cent of UK banks run at least one critical workload on AWS or Azure; the FCA’s own innovation services, including the AI Live Testing programme and the NVIDIA-backed Supercharged Sandbox, sit on hyperscaler infrastructure.
Synergy Research and IDC consistently put combined UK public-cloud share for the two firms in the 70 to 80 per cent range, with AWS holding a small lead. Google Cloud, the third hyperscaler, has historically been treated as a constraint rather than a co-leader by CMA staff, though officials have not ruled out a parallel inquiry should its market position evolve.
What Microsoft and AWS are signalling
Microsoft has publicly accepted the case for what it calls “targeted, evidence-based” remedies in the UK and is already implementing voluntary licensing changes announced in late 2025. AWS has been more combative, arguing in submissions to the CMA that egress fees reflect genuine network costs and that any blanket prohibition would distort pricing. Both companies have built sizeable government-affairs teams in London on the assumption that DMCC enforcement will set precedents the European Commission may follow when the Digital Markets Act enters its first review cycle.
Timeline and what to watch
If the CMA opens the investigation before the summer recess, a provisional decision would be due in early 2027, with conduct requirements following within months of designation. City competition lawyers expect early skirmishes over scope — particularly whether AI-specific cloud services, where hyperscaler bundling with foundation-model APIs is intensifying, are pulled into the same designation. The Treasury, FCA and Bank of England have each indicated they expect a co-ordinated outcome rather than parallel rulebooks. For a generation of British scale-ups whose unit economics turn on cloud pricing, that co-ordination cannot come soon enough.
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