Context: Earlier this year, the UK Competition & Markets Authority (CMA) handed down a preliminary ruling on the cloud computing market (January 28, 2025 ai fray article). The regulator indicated an inclination to let Google off the hook while contemplating the use of a new law, the Digital Markets, Competition and Consumers (DMCC) Act 2024, against Microsoft and Amazon. Google is now engaging in regulatory capture, telling the CMA that it can’t compete and that AI is not a key trend in the cloud services business, while communicating the opposite to shareholders (April 25, 2025 ai fray article).
What’s new: Google stepped up its advocacy pressure on the CMA this week with an “independent” study on the cloud market that urges regulatory intervention (BRG webpage). Yesterday, the UK government issued a new “strategic steer” (a document outlining strategic priorities for competition enforcmeent) to the CMA (UK government webpage).
Direct impact: Google’s objective, which can be summed up as hating to pay licensee fees for third-party software it offers to its customers, can’t be reconciled with the UK government’s clear-cut emphasis on growth, innovation and consumer interests. The CMA can either discontinue a multi-year inquiry (that started at another agency) and disappoint Google, or it can double down on it by referring the matter to its new Digital Markets Unit (DMU), failing to implement the strategic steer faithfully.
Wider ramifications: Last week, the U.S. and the UK reached a “historic” trade deal (May 8, 2025 White House fact sheet). Neither country relinquished its jurisdiction over competition matters, but it would also run counter to the spirit of that Anglo-Saxon partnership to go after U.S. companies (Microsoft and Amazon) over issues that are not serious and particularly not UK-specific.
The Berkeley Research Group (BRG) report is entitled “Microsoft’s business practices in the cloud: a competitive analysis” and, according to its webpage, “[t]he research and analyses performed in preparing this paper were funded by Google.” In September 2024, Google also brought an EU antitrust complaint over Microsoft’s licensing terms. It became known that Google wanted to pay a Brussels group named CISPE to continue its advocacy against Microsoft. And Google is the largest member of the Open Cloud Coalition, some of whose members are one-person companies with significant debt who are not serious competitors but may have other reasons to participate. Other members are actually doing well — too well to serve as poster children of an allegedly distorted market.
The BRG paper starts with the basics of the cloud services businesses, like a cloud business primer. It then places the emphasis on only one use case for cloud services: the migration of on-premises IT installations to the cloud. BRG further narrows its focus by zooming in on Microsoft and its software licensing terms, not without discussing wholly unrelated topics such as Microsoft antitrust cases of decades past.
By retaining BRG to write this paper, Google apparently sought to kill two birds with one stone:
- create a conflict of interest for a firm that just last month touted its involvement on behalf of the United States Department of Justice (DOJ) and 17 U.S. states in their antitrust case against Google (BRG webpage), and
- instigate further investigations targeting Microsoft, which at minimum means that scarce regulatory resources will not be available for investigations of Google’s behavior. The CMA’s new DMU actually has some high-priority topics to address that involve Google, particularly in the mobile app market.
Of course, those motives wouldn’t matter if there were pressing problems to be solved. But the report discredits itself by not recognizing at least three key facts:
- The cloud services business is increasingly driven by demand for AI solutions. Google itself knows this well because it considers AI the key driver of demand for its cloud business at this stage.
- The market share of Microsoft Windows in the cloud is rather low. Linux is the primary cloud operating system.
- Thanks to interoperability, customers also have choice with respect to Office documents. For example, they can open, view, edit and create documents with the Google Workspace suite of software-as-a-service (SaaS) applications. The report does not explain why regulators should impose particular licensing terms on Microsoft while others, such as Google, do not license their software to cloud service providers on any terms.
Google is calling for the opposite of what the UK government wants
In yesterday’s announcement of its new “strategic steer” for the CMA, the UK government stated the following:
“The steer resets the competition watchdog’s priorities, with a renewed focus on prioritising growth and investment while ensuring free and fair competition and protecting the rights of consumers.
“In addition to this, the steer is focused on minimising uncertainty for businesses by encouraging the CMA to be proactive, transparent, timely, predictable and responsive in its engagement, underpinning the government’s upcoming industrial strategy.”
First, the cloud services business is indisputably not a consumer issue. It’s about business-to-business services that constitute a minor part of the IT budget of companies. There is no consumer concern there.
Second, the UK government is obviously right that uncertainty (even more so, protracted uncertainty) is bad for growth and investment. That is why a market investigation that has been going on for several years (first at UK communcations regulator Ofcom, then referred to the CMA) must come to an end. There must be closure to deliver on what CMA CEO Sarah Cardell said in yesterday’s announcement about “focus[ing] on driving greater pace, predictability, [and] proportionality.”
Starting a third investigation over the same old topic (while the market has already moved and is increasingly interested in AI) is the opposite of pace. Investigating the same topic under different legal standards (communications regulations, traditional competition law and then, potentially, a new digital market law) is the opposite of predictability. And tackling a market in which prices are going down and competition is vibrant does not appear proportionate.
The BRG report does not provide any evidence of a market failure. It doesn’t add anything to what the CMA already has in the record. It even relies on the CMA’s published documents in its quest for numbers. There are no numbers there that show how UK consumers or UK businesses would benefit from a presumably unprecedented third regulatory inquiry into the same matter.
Google is trying to use the CMA for its purposes and/or to distract the CMA from issues more deserving of the agency’s attention. Google can sell its customers licenses to Microsoft’s software. It just has to pay license fees, which is inherent to the way intellectual property is commercialized. To do Google’s bidding, the UK would have to engage in governmental price-setting (April 27, 2025 ip fray article). Oddly and counterproductively, the ultimate “remedy” might even make certain (combinations of) offerings more expensive in the UK by prohibiting discounts.
The CMA now faces the fundamental choice between doing Google a favor and paying heed to its government’s strategic steer.