In the News Teaching Activity – the CMA investigates the UK’s cloud computing market (Oct 2023)
The UK's cloud computing market is under scrutiny for being dominated by Amazon and Microsoft.
The UK's cloud computing market is under scrutiny from the competition authorities for being dominated by Amazon and Microsoft, which make up 70-80% of the sector, while Google, with the next biggest market share, holds 5-10%. Ofcom is concerned this lack of competition hinders provider-switching for businesses. The case has been referred to the UK's Competition and Markets Authority (CMA) for investigation. Amazon and Microsoft are willing to cooperate, but Amazon challenges Ofcom's concerns, calling them a "fundamental misconception" of the sector. Cloud computing, essential for businesses and individuals, involves online data storage and remote software usage, impacting data storage, music and video streaming, and gaming. The CMA will conclude its investigation by April 2025, aiming to ensure a fair and competitive market.
1 Using the information given, calculate the range for the three-firm concentration ratio in the UK cloud computing market.
2 Identify the market structure for the cloud computing industry in the UK.
3 Given the market structure you identified, what sort of anti-competitive behaviour might you expect to see in cloud computing? Give some examples relevant to the cloud computing market.