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Out-Law News 1 min. read

UK cloud market investigation proposed

Ofcom is proposing to refer the UK’s cloud infrastructure services market for an in-depth investigation after identifying “concerns” over the way the market is currently operating.

The regulator is at the mid-point of its own market study, which it opened in September last year with a view to determining how well the market for cloud infrastructure is operating. At the time, it said it would it assess the strength of competition in cloud services, the position that the largest providers hold in the market, whether it is difficult for other providers to compete, and any other adverse impacts on consumer outcomes generally.

It has now said that it has uncovered “practices and features that could limit competition”.

“While competitive market forces are delivering benefits to customers – especially where providers are competing to attract new customers – in the form of innovative products and discounts, other features of the market give cause for concern,” Ofcom said.

Among the issues it has identified include around the charges imposed on cloud customers that wish to transfer their data out of the cloud. Ofcom said the fees can discourage customers from using more than one cloud provider or from switching to another. It also said technical restrictions on interoperability make it harder for customers to work with data and software on a multi-cloud basis. The regulator also said that customers may be missing out on alternative cloud solutions when taking advantage of discounted spend offers made by some cloud providers. It said there is evidence that the measures are leading to customer harm and limits on competition.

In light of its preliminary findings, Ofcom is consulting on referring the cloud infrastructure services market to the UK’s Competition and Markets Authority (CMA) for an in-depth market investigation. This, it said, would enable the CMA to “further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers”.

Ofcom’s interim findings and market investigation reference proposals is open to feedback until 17 May 2023. The regulator is due to submit its final market study report, and make a final decision on a market investigation reference, by 5 October at the latest.

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