On September 22, the Office of Communications (Ofcom)—the United Kingdom’s communications regulator—announced and released a program of work stating its intention to examine the position of the largest providers of cloud services (known as “hyperscalers”) in the United Kingdom’s £15 billion ($16.7 billion) cloud services market.
This follows a recent joint statement released by the Competition and Markets Authority (CMA) and Ofcom, which sets out both regulators’ views on the interactions between online safety and competition in digital markets.
As cloud services have become an essential part of how products and services are being delivered in the UK digital market, Ofcom will, in the coming weeks, conduct a market study under the Enterprise Act 2002 into cloud services in the United Kingdom, with respect to the activities of hyperscalers, with a view to assessing the strength of competition within that industry, and the likely adverse impact on consumer choice and protection.
In its program of work, Ofcom noted its intention to focus its market study on:
- cloud infrastructure, which includes Infrastructure as a Service (IaaS) and Platform as a Service (PaaS); and
- cloud software applications, which is known as Software as a Service (SaaS).
Ofcom will also look at cloud services more broadly to consider competition issues across the different vertical levels of the cloud services market.
Ofcom has once again reiterated its intention to work with other regulators, such as the CMA, the Information Commissioners’ Office (ICO), and the Financial Conduct Authority (FCA), through the Digital Regulation Cooperation Forum (DCRF), in addressing specific competition and data responsibilities issues stemming from tech and telecommunication firms having substantial and entrenched market power in the United Kingdom.
If the market study identifies competition concerns, Ofcom could:
- make recommendations to the government to change regulations or public policy;
- make a market investigation reference to the CMA pursuant to which the CMA will have broad enforcement powers ranging from imposing remedies to ordering the break-up of one or more hyperscalers;
- seek to extract binding commitments from relevant hyperscalers in lieu of such a reference.
Ofcom will be publishing shortly a formal notice of its intention to undertake a market study and a Call for Inputs which will set out in more detail the scope of work and seek input from industry stakeholders.
If you are concerned about the impact of the market study on your business, reach out to your usual Morgan Lewis contact.
Trainee solicitor Samuel Omotayo contributed to this blog post.