Regulators probe hyperscaler pricing and lock-in practices

Antitrust authorities across the US, UK, and EU are escalating investigations into major cloud providers, focusing on data egress fees, long-term commitments, and potential market lock-in, as competition fears intensify amid industry consolidation.

Antitrust authorities in the United States, the United Kingdom and the European Union have intensified scrutiny of major cloud providers over pricing and contractual practices that regulators say may lock customers into long‑term relationships and restrict competition. The Federal Trade Commission has been collecting information since 2023 and expanded its inquiry in 2025 into data egress fees, long‑term spending commitments and bundled licensing; the CMA completed a two‑year market inquiry in July 2025 and the European Commission has opened parallel reviews under the Digital Markets Act and a sector‑wide probe. ^[1][4][2]

Government findings and industry trackers point to a concentrated market dominated by a small number of hyperscalers. Industry estimates cited by CIO Dive and the CMA place Amazon Web Services and Microsoft Azure as the largest providers globally and in the U.K., with Google Cloud notably smaller. The CMA’s July 2025 report estimated AWS and Azure each account for roughly 30–40% of U.K. cloud spend, with Google at 5–10%, and found that customers rarely switch providers, less than 1% annually, underlining the practical effects of switching costs and licensing frictions. ^[1][4]

Regulators are focused on several specific practices. Data egress charges for transferring data out of a cloud environment are central to inquiries because they can make switching prohibitively expensive. Discounts tied to long‑term commitments and minimum‑spend agreements are being examined as potential exclusive‑dealing incentives that disadvantage smaller firms. Bundled licensing and proprietary services that raise the cost of running rival clouds, and opaque billing and unilateral pricing changes that startups say undermine budgeting, feature prominently in the record built by the FTC, CMA and the European Commission. ^[1]

The hyperscalers have disputed characterisations of anti‑competitive conduct. According to CNBC, Microsoft told the CMA its decision “misses the mark,” calling the cloud market “dynamic and competitive” and arguing the agency underestimates Google’s growth. Amazon warned recommendations for further probes could make the U.K. a regulatory outlier, while Google welcomed the CMA’s work, calling it a “watershed moment” for fair pricing and choice. AWS has defended data transfer‑out fees as reflecting substantial investment in its network and cautioned price controls could have “harmful, unintended consequences.” The company also told the CMA it has eliminated these fees globally for switching customers, which it says addresses core exit‑cost concerns. ^[1][5][2]

Regulators and market participants are also viewing developments through an artificial intelligence lens. Startups building AI applications report cost opacity and lock‑in risks when scaling on hyperscaler platforms, and the FTC is gathering information on cloud–AI partnerships, seeking details on equity stakes, revenue‑share rights and embedded cloud‑spend commitments, to assess whether such arrangements entrench dominant suppliers. Industry reporting has described some AI firms delaying traditional AWS adoption in favour of AI‑specific tools and alternative GPU clouds. ^[1]

Policy debate has split experts and industry groups. The International Center for Law & Economics cautioned in submissions to the FTC that concentration alone is an unreliable proxy for harm and warned that imposing Strategic Market Status could be disproportionate. Academic work, including a January 2025 study by Gary Biglaiser and co‑authors, finds cloud providers have incentives to impose egress fees; while banning or capping those fees may raise consumer surplus, firms might respond by introducing alternative switching costs, complicating any regulatory remedy. Industry consultants argue hyperscalers now offer more straightforward exit programmes and contend complexity often stems from architectural realities rather than deliberate entrapment. ^[6][1]

Regulatory actions and market responses have already produced change. In September 2025 Google said it would eliminate certain data transfer fees for organisations operating workloads across multiple clouds in the EU and U.K., a move framed as supporting multicloud strategies and competition. Microsoft began charging data transfer fees “at cost” from 26 August 2025, while AWS has offered reduced rates on request for some EU use cases. In November 2025 Google withdrew an earlier EU antitrust complaint about Microsoft after the European Commission launched a broader sector probe. These developments show the sector is evolving even as formal investigations continue. ^[2][3]

Looking ahead, the CMA has recommended advancing Strategic Market Status probes for AWS and Microsoft, the European Commission is assessing DMA designations and obligations such as interoperability and portability, and the FTC is continuing to build its record through information demands and public comments. Potential remedies under consideration range from transparency mandates or limits on egress fees to fair‑use licensing obligations and portability standards; regulators face the challenge of designing measures that curb foreclosure without prompting new, hard‑to‑detect switching costs. ^[1][4][6]

📌 Reference Map:

##Reference Map:

• ^[1] (JD Supra lead article) – Paragraph 1, Paragraph 2, Paragraph 3, Paragraph 4, Paragraph 5, Paragraph 6, Paragraph 7, Paragraph 8
• ^[4] (Reuters, 31 July 2025) – Paragraph 1, Paragraph 2, Paragraph 8
• ^[5] (CNBC, 28 January 2025) – Paragraph 4
• ^[6] (International Center for Law & Economics submission to FTC) – Paragraph 6, Paragraph 8
• ^[2] (Reuters, 10 September 2025) – Paragraph 7
• ^[3] (Reuters, 28 November 2025) – Paragraph 7

Source: Fuse Wire Services