Carson Holmgren, MJLST Staffer
The rapid rise of generative AI in recent years has boosted key players in the field to record-breaking valuations.[1] Yet many major firms lack the server capacity needed to operate their models at scale and rely heavily on third-party cloud service providers (“CSPs”) to meet their computing needs.[2] This dependency has fueled massive growth in the CSP industry, with annual global revenue predicted to exceed $400 billion in 2025[3] and $2 trillion by 2030.[4] Roughly 60% of the global CSP market is controlled by just three U.S. companies: Amazon Web Services, Microsoft Azure, and Google Cloud.[5] While critics warn of the risk in letting so few companies dominate the cloud,[6] Washington has largely stood idle and allowed these companies to consolidate their position in the market. However, recent legislation in the United Kingdom may offer U.S. policymakers a blueprint for creating a more completive CSP market.
The U.S. has adopted a passive stance towards CSP regulation for two primary reasons: a reactive antitrust framework and a political environment hostile to regulation.
U.S. antitrust law focuses not on a firm’s position in the market, but whether the firm’s conduct harms competition.[7] These harms may be difficult to quantify[8] but are primarily measured through effects on consumer welfare, such as higher prices or reduced output.[9] Absent the manifestation of such harms, private parties are unable to sue, and regulators are unable to take aggressive enforcement actions.[10] Private and public actors must essentially wait for anticompetitive behavior to occur and cause harm before they can act.
The current political context reinforces this inertia. The Trump administration has cultivated close ties with tech firms[11] and pushed a broader deregulatory agenda.[12] Aggressively regulating firms seen as friendly to the administration is, therefore, a low political priority.
The United Kingdom has presented an alternative to this passive approach. In 2024, the U.K. House of Commons passed the Digital Markets, Competition and Consumers Act (“DMCCA”), aimed at expanding the regulatory powers the Competition and Markets Authority (“CMA”) may exert over tech companies.[13] Unlike the current U.S. framework, the DMCCA allows the CMA to act before market harms manifest, establishing a more proactive regulatory regime.[14]
One of the new powers granted to CMAs is the ability to designate a company as having strategic market status (“SMS”). An SMS designation requires findings of entrenched market power, strategic significance to digital markets, and meeting turnover thresholds.[15] Firms having SMS are subject to additional oversight, including Conduct Requirements (“CRs”) and Pro-Competition Interventions (“PCIs”).[16]
CRs regulate how SMS-designated firms interact with consumers, competitors, and partners, imposing baselines of fair conduct.[17] CRs may prohibit discriminatory conditions against particular users, prevent self-preferencing, ensure interoperability with rival services, and mandate that sensitive user data not be used to secure an unfair advantage.[18]
PCIs can be implemented through Pro-Competition Orders (“PCOs”) and are structural sanctions aimed at attacking the source of a company’s entrenched market power. A PCO may require a company to make fundamental changes to their operations, and are distinguishable from CRs in that they are considered on-off interventions designed to reshape the competitive environment itself.[19]
How the CMA will apply its powers under the DMCCA remains uncertain, as the regime is still in its early phases. The first DMCCA investigation was launched in January 2025 and resulted in a proposal to issue Google’s search engine an SMS designation.[20] This proposal was positively received by academics and consumer advocacy groups,[21] but no CRs or PCIs have been introduced.
The U.K.’s CSP market is similarly concentrated, with Amazon Web Services and Microsoft Azure controlling roughly 80% of the market.[22] On July 31, 2025, the CMA published the findings of a pre-DMCCA report, noting that the two firms market dominance harms competition.[23] The report recommended SMS investigations, making it likely that both firms will eventually be designated as having SMS.
While no CRs or PCIs have been proposed, the report hints at what actions the CMA may take. It notes that less than 1% of users change CSPs annually, largely due to artificial barriers, including self-preferencing software compatibility requirements and high egress fees when migrating data to rival services.[24] The CMA could remove these barriers by issuing CRs requiring interoperability between competitors and limiting egress fees. Such actions would increase user mobility and spur greater competition between CSPs.
Microsoft’s licensing practices were also flagged as a concern. The CMA found that users had to adopt a full suite of Microsoft products to use Microsoft Azure effectively, making it difficult to change CSP once adopted. Microsoft can extract such concessions from customers due to its dominant operating system and software. To address this entrenched power, something more substantial than a CR is required. A one-off PCI, such as unbundling software or adjusting licensing terms for Microsoft Azure customers, could reduce Microsoft’s structural advantage and open up the market.
The DMCAA provides a model of what proactive antitrust regulation could look like in the United States. Critical components of the emerging AI economy are highly concentrated and ripe for anticompetitive exploitation. Adopting legislation mirroring the DMCCA would allow U.S. regulators to set clear rules for fair conduct upfront, rather than relying on long, resource-intensive efforts to break up monopolies after the damage is already done.
Notes
[1] Skye Jacobs, AI Boom Drives Record S&P 500 Valuations, but Goldman Sachs Warns of $1 Trillion Risk Ahead, TechSpot (Sept. 6, 2025), https://www.techspot.com/news/109358-ai-boom-drives-record-sp-valuations-but-goldman.html.
[2] Nihad A. Hassan, The Impact of Generative AI on Cloud Infrastructure Demand, Cybernews (May 3, 2025), https://cybernews.com/security/generative-ai-cloud-infrastructure.
[3] Felix Richter, The Big Three Stay Ahead in Ever-Growing Cloud Market, Statista (Aug. 21, 2025), https://www.statista.com/chart/18819/worldwide-market-share-of-leading-cloud-infrastructure-service-providers.
[4] Goldman Sachs, Cloud Revenues Poised to Reach $2 Trillion by 2030 Amid AI Rollout (Sept. 4, 2024) https://www.goldmansachs.com/insights/articles/cloud-revenues-poised-to-reach-2-trillion-by-2030-amid-ai-rollout.
[5] Id.
[6] Max Von Thun, Cloud Computing is Too Important to be Left to the Big Three, Financial Times (May 25, 2025), https://www.ft.com/content/5c930686-9119-402d-8b9b-4c3f6233164e.
[7] Daniel Francis, Antitrust Without Competition, 74 Duke L.J. 353, 355–56 (2024).
[8] Id.
[9] Lina M. Khan, The Amazon Anti-Trust Paradox, 126 Yale L.J. 710, 720 (2017).
[10] Herbet Hovenkamp, Antitrust Harm and Causation, 99 Wash. U. L.R. 787, 837–38 (2022).
[11] Ali Swenson, These Tech Billionaires Flanked Trump at Inauguration, AP News (Jan. 20, 2025) https://apnews.com/article/trump-inauguration-tech-billionaires-zuckerberg-musk-wealth-0896bfc3f50d941d62cebc3074267ecd.
[12] See The White House, President Trump, Tech Leaders Unite to Power American AI Dominance (Sept. 5, 2025) https://www.whitehouse.gov/articles/2025/09/president-trump-tech-leaders-unite-american-ai-dominance/; see also Alexandra Charbi & Juan Rojas, Merger Enforcement Policies of the Second Trump Administration: Early Developments and Priorities, ABA Antitrust L. Section (Aug. 29, 2025), https://www.americanbar.org/groups/antitrust_law/resources/newsletters/merger-enforcement-policies-second-trump-admin.
[13] See White & Case LLP, Navigating the New UK Antitrust Landscape (Jan. 8, 2025), https://www.whitecase.com/insight-alert/navigating-new-uk-antitrust-landscape.
[14] Id.
[15] Competition and Markets Authority, How the UK’s Digital Markets Competition Regime Works (last updated Jan. 23, 2025), https://www.gov.uk/guidance/how-the-uks-digital-markets-competition-regime-works?ucriteria-for-strategic-market-status.
[16] Id.
[17] Lisa Mildt, Nanret Senok & Luke Streatfield, Remedies Under the DMCCA: A New Digital Regulation Toolkit in the U.K., Hausfeld Competition Bull., (Mar. 28, 2025) https://www.hausfeld.com/what-we-think/competition-bulletin/remedies-under-the-dmcca-a-new-digital-regulation-toolkit-in-the-uk.
[18] Id.
[19] Id.
[20] Competition and Markets Authority, Strategic Market Status Investigation Into Google’s General Search Services (June 24, 2025) https://assets.publishing.service.gov.uk/media/68598b13eaa6f6419fade67b/Proposed_decision.pdf.
[21] Anush Ganesh, Google SMS Designation Responses – A Comprehensive Analysis, SCiDA (Sept. 11, 2025) https://scidaproject.com/2025/09/11/google-sms-designation-responses-a-comprehensive-analysis/.
[22] Competition and Markets Authority, supra note 22.
[23] Id.
[24] Id.