Amazon, Microsoft cloud computing services should fall under DMA, EU says

The European Commission has informed Amazon (AMZN) and Microsoft (MSFT) of its preliminary view that they should be designated as gatekeepers under the Digital Markets Act, for their cloud computing services, Amazon Web Services and Microsoft Azure respectively. In both cases, the Commission preliminarily finds that AWS and Azure, the largest and second largest cloud computing services in the EU respectively, are an important gateway between businesses and their customers in the EU. This is the case despite them not meeting the DMA’s quantitative thresholds for designation. Amazon and Microsoft have already been designated as gatekeepers for other services. Their cloud computing services AWS and Azure have achieved significant turnover, and their operational capacity and investments seem to have significantly outpaced those of competitors. They both have vast and entrenched user bases and appear to benefit from lock-in effects and high switching costs, in addition to a large ecosystem. Furthermore, their portfolio of Artificial Intelligence tools and partnerships have become a decisive factor in cloud procurement. Whilst AI is significantly increasing the demand for cloud-related services, AWS and Azure appear to retain a large proportion of this increased demand within their respective ecosystems. Finally, both Amazon and Microsoft appear to hold an entrenched and durable position in the EU cloud computing sector, as is evidenced by AWS’s and Azure’s leading market position over many years. Amazon and Microsoft now have the possibility to exercise their rights of defence, including by examining the documents in the Commission’s investigation file and replying in writing to these preliminary findings. If the Commission’s preliminary findings are confirmed, the Commission will adopt decisions designating Amazon and Microsoft as gatekeepers for their cloud computing services. In that case, Amazon and Microsoft would have six months to ensure full compliance of their designated cloud computing services with the DMA’s obligations.

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