The U.K. cloud market has been thrust firmly into the regulatory crosshairs, with news that the Competition and Markets Authority (CMA) is launching a full-scale investigation into whether the big cloud infrastructure companies make it difficult for businesses to switch, or use multiple providers.

The news comes a full year after Ofcom revealed it was initiating a market study into the £7.5 billion U.K. cloud services market, though the regulatory body indicated at the report’s halfway point in April that it had identified concerns that might warrant escalation to the CMA. And that is what is happening now — today signals the start of an independent market investigation, where the CMA will “examine the market and consider whether there are competition concerns.”

So this effectively is the investigation entering phase 2, where the CMA has established an inquiry group who will decide on the full scope and specifics of the investigation.

“Many businesses now completely rely on cloud services, making effective competition in this market essential,” CMA CEO Sarah Cardell said in a statement. “Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players — unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.”

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At the heart of the probe is whether Amazon’s AWS, Microsoft and Google, which account for up to 90% of cloud revenues in the U.K., engage in anti-competitive practices that lock customers into their respective ecosystems. However, Ofcom’s report seems to focus more on AWS and Microsoft specifically, given that they are lightyears ahead in terms of cloud revenue spend, accounting for as much as 80% between them.

The main bones of contention relate to so-called “egress fees,” which are non-transparent fees that the cloud behemoths charge for moving data out of their clouds to elsewhere (e.g. a rival company), which can make it prohibitively expensive to leave a given provider. Ofcom also pinpointed interoperability as a main area of concern, whereby cloud companies design their products to not play ball with rival services, which can create significant friction for companies pursuing a multi-cloud approach. And finally, the CMA will look at the practice of the big cloud vendors offering “committed spend discounts,” which, it says, could encourage companies to stick with a single vendor.

However, Ofcom had also identified possible issues around Microsoft’s software licensing practices, regarding how it may use its dominance in the business software realm to make it more expensive for companies to run its applications on rival clouds. This is similar to complaints that have been made against Microsoft by several third-party companies in the European Union.

In this instance, however, Ofcom has elected to make no direct findings regarding Microsoft’s software licensing practices, noting that it will be “for the CMA to decide whether to investigate these issues further during the market investigation.”

On that note, it’s worth noting that the CMA hasn’t made a final decision on which elements of Ofcom’s findings it will decide to focus on — this will come in a separate report it will publish “in due course.”

Sridhar Iyengar, European managing director of cloud business software company Zoho, welcomed the investigation, saying that the CMA needs to take action.

“The adoption of cloud services delivers significant benefits to businesses, including facilitating a shift to new remote and hybrid working models while promoting wealth and skills distribution,” Iyengar said in a statement issued to TechCrunch. “However, businesses shouldn’t get tied up in cloud contracts with limited flexibility and fees to disincentivise switching providers.

Mark Boost, CEO of U.K. cloud company Civo, added that the price-point charged on egress “is out of control,” adding that the CMA should consider actions that make it easier and less cost-prohibitive to lift-and-shift their data.

“It will be particularly important to tackle egress fees, either through significant price controls or the most ambitious choice — abolishing them entirely,” he said in a statement sent to TechCrunch.

As one of the main players in the CMA’s crosshairs, Microsoft said that it intends to “engage constructively” with the CMA throughout their investigation. As a sidepoint here, Microsoft recently had its $68.7 billion Activision acquisition blocked by the CMA on competition grounds, though this could soon be greenlighted following a restructuring of the proposed deal — so Microsoft already has its fair share of dealings with the CMA right now.

Amazon, meanwhile, also said that it intends to work “constructively” with the CMA. However, it was a little more vocal on the merits of this new investigation. A spokesperson said that the company disagrees with Ofcom’s findings, and believes that they are founded upon a “fundamental misconception of how the IT sector functions.”

“Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services,” the spokesperson said in a statement issued to TechCrunch. “AWS designs cloud services to give customers the freedom to choose technology that best suits their needs. U.K. companies, and the overall economy, benefit from robust competition among IT providers, and the cloud has made switching between providers easier than ever. Any unwarranted intervention could lead to unintended harm to IT customers and competition.”

The CMA said that it expects to finalize its investigation by April 2025, though it will announce which areas it intends to focus on long before that.