To quote this paper: K. KHEIREDDINE, “Cloud Computing and Competition: The French Competition Authority’s Extensive Analysis of Competitive Challenges and Future Perspectives”, Competition Forum, 2025, n° 0066 https://competition-forum.com. 

On June 29, 2023, the French Competition Authority (the Authority) released a long-anticipated and rather lengthy opinion on competition in the cloud computing sector. [1]This publication followed an intensive investigative period of a year and a half after it initiated proceedings ex officio, and a year after launching a public consultation.[2]

Following extensive stakeholder engagement, -including a first-time involvement of data scientists,hearings with both suppliers and customers, and a plethora of information requests, the Authority provided an in-depth analysis of the competitive dynamics and potential challenges as the digital economy enters a new phase.  [3]

Spanning over 200 pages, the opinion delineates definitions, provides an overview of market players,identifies competition risks and underscores the necessity of safeguarding innovation while minimizing costs in a sector that serves as a critical engine for economic development.

A clear understanding of any topic begins with a precise definition. The U.S. National Institute of Standards and Technology (NIST) describes cloud computing as a “model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction”.[4]

The evolution of cloud computing has been driven by the need for businesses to manage and store data efficiently. Traditionally, companies relied on costly in-house IT infrastructure or outsourced its management to specialized firms. However, advances in internet technology and computing power have given rise to the cloud, allowing firms to store data, access software, and utilize those resources remotely. This innovation has facilitated greater flexibility, scalability, and cost-effectiveness.

With its growing influence on markets and industries, it is no surprise that competition authorities are taking a closer look. Cloud adoption has surged in recent years, with demand skyrocketing during the COVID-19 pandemic as remote work became a necessity. This momentum is expected to continue and exceed $1 trillion by 2028, growing at an annual rate of 12%. [5]

In France alone, the cloud market is anticipated to reach €27 billion by 2025, with an annual growth rate of 14%. [6]

The opinion first provides an overview of the cloud computing sector before proposing the relevant market definitions for competition analysis. If there are a few standout elements in this opinion, one of the most notable is its approach to market definition, it introduces an innovative framework based on user needs and customer workloads. This methodology offers a fresh perspective on how cloud markets should be analyzed, breaking away from previous approaches.

Faced with uncertainties in existing case law [7]the French Competition Authority appears intent on changing that by proposing a structured framework that goes beyond theory. The opinion later shifts focus to key concerns and anti-competitive practices, whether already in place or likely to emerge. Finally, the Authority examines competition law tools, regulatory responses, and legislative measures, before outlining future perspectives and delivering “ready-to-use” findings that could guide future enforcement measures[8].

I. Understanding the structural dynamics of a rapidly expanding market

A. The strategic importance of cloud computing and its market players

As a preliminary matter, it is essential to understand how this complex market operates—who the key players are, who their clients are, and how their interactions shape the industry’s dynamics. This opinion solely focuses on public cloud, which provide business with direct access to a range of computing resources. In contrast, private cloud is reserved for a single organization and managed either internally or by a third party.

Cloud services fall into three main categories, each reflecting different levels of responsibility sharing between providers and their clients. First, IaaS (Infrastruction-as-a-Service) offers basic infrastructures such a servers and storage, leaving most IT management to the client; PaaS (Plateform-as-a-Service) provides an environment for software development without requiring users to maintain the underlying infrastructure. Lastly, SaaS (Software-as-a-service), the most outsourced model, gives users access to fully managed applications from any connected device. However, The French Competition Authority focuses primarily on IaaS and PaaS, as they form the backbone of cloud services for business clients [9].

The Authority also distinguishes between different cloud players. At the forefront are hyperscalers—these dominant digital giants that no longer need to be named, remain the focus of regulatory concerns. Originally established in the digital sector before expanding into cloud services, they benefit from massive storage and computing capacities, reinforcing their market power. Companies like Amazon, Google and Microsoft do not shy away from leveraging their financial resources and extensive ecosystems. Alongside them are pure players, solely focused on cloud services, as well as trusted cloud providers who offer certified secure solutions, and finally, digital service companies that assist businesses in transitioning to the cloud.

B. A market shaped by significant entry barriers and structural concentration

Unsurprisingly, cloud customers are predominantly businesses, spanning various industries and ranging from traditional companies migrating their IT infrastructure-a costly and time-consuming process that can take up to two years- to cloud-native firms, which have operated entirely in the cloud since their creation, making them highly adaptable. These companies are prime targets for cloud service providers, enabling the latter to position themselves as their primary suppliers.

To get to the heart of the matter, the opinion sheds light on significant concerns. First, providing cloud services demands significant costs and investments. In France, infrastructure is particularly costly, it requires approximately €100 to €200 million for machine purchases, human resources, and other essential elements. Building cloud infrastructure is also a long-term process, often taking five to six years.

While these high costs and lengthy development timelines already make market entry exceptionally difficult, the challenge is further compounded by the dominance of the powerful digital players. They hold substantial competitive advantages, benefiting from economies of scale and scope, leveraging the various services within their ecosystems, and accessing a pre-existing customer base—advantages that are difficult for others to replicate or challenge. This further reinforces market concentration, placing hyperscalers in a position to hinder competition.

Another striking reality in the French market is its high level of concentration, with Amazon and Microsoft holding 46% and 17% of IaaS and PaaS revenues in 2021, respectively, and together capturing 80% of the growth in public cloud infrastructure and application spending.[10] It is nonetheless important to point out that these figures may vary from one study to another depending on the methodology and the scope of the analysis.

Building on these concerns, the opinion highlights a “competition-for-the-market” dynamic, as explained by Alain Ronzano[11], this somewhat intriguing phrasing means that for a specific need or workload, clients typically contract with a single provider, resulting in a serious lack of multi-homing.

Lastly, the market is characterized by limited fluctuations in market shares, largely due to the risk of customer lock-in within these ecosystems. Migration challenges further restrict clients’ ability to switch from one hyperscaler to another, exacerbating competitive barriers and limiting customer choice.

II. Competitive risks and regulatory responses

A. Competition risks identified by the Authority

The Authority then turns its focus to identifying competition risks, first examining cross-cutting risks that broadly affect competition across the sector before analyzing three specific risk scenarios.

One of the key cross-cutting risks is the striking imbalance in relationships between clients and hyperscalers. Due to their economic power, the latter often imposes standard contracts with little to no room for negotiation, creating a double asymmetry between providers and their clients. [12]

Another major challenge for clients is the difficulty in anticipating future cloud costs, as pricing structures are complex and often lack transparency, making it harder for businesses to accurately predict their long-term expenses. The opinion also raises concerns about cloud credits and egress fees, two mechanisms that may create barriers to entry and expansion. First, cloud credits provide customers with discounted expenses on certain services, sometimes amounting hundreds of thousands of euros and lasting for several years. However, their scale and the investment required to compete with such offers can hardly be matched by competitors, making it difficult for them to enter or grow in the market. Egress fees present a second challenge. It is a pricing model, customers must pay to transfer data out of a provider’s cloud environment, whether migrating it to another cloud provider or back to on-premises infrastructure. The high costs and restrictive conditions associated with these fees have drawn scrutiny from the Authority, which distinguishes them from free trial offers typically found in other industries.

Another significant issue is the risk of customer lock-in, as major cloud providers use contractual clauses or business practices that limit a client’s ability to switch providers or use multiple providers simultaneously. This lock-in effect is further reinforced by pricing opacity and the bundling of services in a non-transparent manner. Indeed, investigations have revealed that some clients were unaware that certain services were complementary, leading them to purchase bundled services without full disclosure. As a defense, Amazon Web Services (AWS), one of the world’s leading providers, argued as a defense that some services enhance each other’s functionality, justifying their joint sale. [13]. Ultimately, this alarming lack of transparency could lead to artificially increased prices, further strengthening the market power of dominant players.

The Authority also identified specific competitive risks based on three distinct time scenarios: initial adoption of cloud services, migration from one cloud provider to another, and barriers to expansion for hyperscaler’s competitors.

The first-time migration of IT systems from on-premises infrastructure to the cloud is a complex and costly process, often pushing businesses toward historical IT service providers when these providers also offer cloud services. This dynamic can be reinforced by restrictive contractual clauses, including bundling practices, pricing advantages favoring their own products, and technical restrictions. If implemented by a dominant provider, such practices constitute abuses of market power.

Switching from one cloud provider to another also presents major migration obstacles. Technical barriers to migration exist, but they can be followed by deliberate practices by cloud providers that further increase switching costs. The lack of data and application portability can lead to significant migration expenses, discouraging customers from moving to a competitor. Beyond technical barriers, cloud providers may also raise migration costs strategically to strengthen their market position.

Competitors also face major barriers to expansion, particularly technical obstacles to interoperability. Some providers may restrict access to essential software needed to deliver cloud services, for example, by raising licensing fees or tying their use to the purchase of a large number of licenses. 

Further, cloud providers may favor their own solutions on their marketplaces, impose pricing parity clauses.

B. Competition law as a strategic regulatory tool : leveraging existing mechanisms in digital markets

It is now well established that competition law serves as a powerful regulatory tool, particularly well-suited to addressing challenges in digital markets. Designed to safeguard consumer welfare, competition law operates as a global discipline, shaped as an international legal framework to tackle cross-border issues. Its universal scope allows regulators to address anti-competitive practices beyond the EU’s borders, notably through the effects doctrine.

Building on this foundation, the French Competition Authority concluded that France is well equipped to address the concerns raised in its opinion using existing competition law tool such as abuse of dominant position[14], anti-competitive agreements[15], interim measures, abuse of economic dependence [16], and merger control. [17]These tools are not relics that need to be dusted off and pulled out of storage. They have been extensively deployed in recent years to regulate the digital economy and challenge the market power of tech giants.

Addressing concerns about anti-competitive agreements seems fitting, as alliances and associations of cloud service providers have emerged in recent years, leading to technological partnerships between major software providers and cloud service providers. For instance, in 2019, Microsoft and Oracle formed an interoperability partnership to allow customers to migrate and run critical workloads across Microsoft Azure and Oracle Cloud.

Merger control, on the other hand, plays a crucial role in preventing well-established players from reinforcing their market power through the acquisition of smaller competitors. But despite significant acquisitions in the cloud sector, many transactions have escaped competition scrutiny, raising concerns about increasing market concentration.

A key tool in this regard is Article 22 of the EU Merger Regulation No. 139/2004, which, as we now know, allows national competition authorities to refer mergers to the European Commission, even if they do not meet national notification thresholds.Another legal instrument is article 102 TFEU, which can be used to review anti-competitive behavior post-merger, as highlighted in the Towercast case).  [18]

Beyond traditional competition law tools, abuse of economic dependence offers an alternative enforcement avenue which, unlike abuse of dominance, does not require an assessment of a player’s dominant market position but focuses instead on the company’s commercial relationships with its partners. [19]This makes it a flexible and useful tool to address imbalances in bargaining power.

Existing case law also provides valuable precedents. For instance, the famous Google Shopping case,clarified self-preferencing and discriminatory practices, the Nespresso case, on practices in the sector of coffee machines[20], addressed tying practices, and the Microsoft decision by the European Commission provided guidance on a dominant firm’s refusal to supply interoperability information.

Another regulatory avenue is through the French Directorate-General for Competition, Consumer Affairs, and Fraud Control (DGCCRF’s)enforcement of restrictive competition practices, particularly in cases of significant imbalance or undue advantages without compensation in commercial relationships.

The European Commission is also, as one would expect, actively scrutinizing the cloud market. On June 25, 2024, it issued a Statement of Objections against Microsoft, alleging illegal tying of its cloud-based communication software Teams with its Office 365 and Microsoft 365 productivity suites. Microsoft holds a dominant position in the global SaaS productivity applications market and has engaged in abusive conduct by favoring Teams’ distribution at the expense of competing SaaS productivity applications. This advantage is further reinforced by interoperability limitations imposed on Teams’ competitors.  [21]

III. Regulatory challenges and future developments

A. A necessary intervention to address regulatory shortcomings

While this comprehensive opinion represents a major step forward, some practitioners have expressed understandable concerns regarding the regulatory perspectives for cloud services in Europe, regretting a lack of clarity that calls for a robust and agile regulatory framework.

As some questions are answered, new ones arise; a reflection of the ever evolving and complex nature of this sector: is the French Competition Authority as equipped as it claims to act effectively in this sector? What if some of the issues identified do not necessarily stem from deliberate anti-competitive behavior but rather from the fundamental nature of cloud computing and its digital ecosystem?

More importantly, and as authors Aymeric de Moncuit and Sarah Wilks have pointed out, would an intervention based on abuse of dominant position truly lead to structural market changes? Indeed, abuse of dominance cases tend to result in financial penalties, often extremely high fines. The lessons from recent cases against digital giants suggest that, despite record-breaking fines, their market power and financial strength remain largely unchallenged, raising doubts about whether fines alone have a sufficiently deterrent effect.

At the same time, it is now widely recognized and understood that an ex-ante approach is often more effective in tackling competition concerns in fast-moving digital markets, where anti-competitive effects can escalate rapidly. Encouragingly, the French Competition Authority has already announced plans to further strengthen its merger control powers, ensuring it is better equipped to intervene in digital markets, where traditional competition law concepts often fall short.

However, one major regulatory gap remains: cloud providers have so far escaped some of the stricter obligations of the Digital Markets Act (DMA[22]). A particular issue was spotted by the French Competition Authority: while the DMA was designed to regulate dominant digital platforms, no cloud service has been designated as a core platform service due to the B2B nature of the industry. Under Article 3(2)(b) of the DMA, a platform must have at least 45 million monthly active end users in the EU, a threshold that most cloud services do not meet. [23]On this topic, Benoît Cœuré, President of the French Competition Authority has openly called for amendments to the DMA to better address competition concerns in the cloud market. [24]

On a more positive note, the European Data Strategy has, as one of its goals, ensuring that by 2030, at least 75% of businesses in the EU use cloud computing services. The EU Data Act[25] also seems like the step in the right direction as it introduces binding requirements for all cloud providers. It sets minimum regulatory standards to facilitate customer switching, reducing lock-in risks, and creates European standards for interoperability to ensure greater compatibility between cloud services. Many of these obligations are set to take effect from late 2025, promising significant and positive changes.

B. The future of cloud competition: technological, regulatory, and geopolitical horizons

As the cloud market continues to evolve, emerging technologies, regulatory shifts and global challenges will, without a doubt, play a decisive role in shaping its competitive landscape. The growing adoption of artificial intelligence (AI) is set to be a key driver of cloud service demand, particularly with the development of increasingly complex models such as Large Language Models (LLMs) and generative AI. The rise of edge computing, which enables data processing closer to the source, is also anticipated to profoundly impact the sector. [26]

In addition to AI, other emerging applications such as cloud gaming are likely to influence market trends. Meanwhile, beyond technological evolution, geopolitical shifts may affect cloud security innovations, while the growing focus on environmental sustainability could push providers to adopt more eco-friendly cloud infrastructure- a “green cloud”. [27]

The French Competition Authority’s initiative stands out, not only for its innovative approach but also for the depthof its investigation. Without a doubt, this extensive work will serve as a valuable reference for future cases. As the latest regulatory tools at the European level are still in their early stages, their long-term impact remains to be seen. However, one certainty emerges: the cloud sector is undeniably promising and will continue to attract considerable scrutiny in the years to come.

Kincy KHEIREDDINE

[1] French Competition Authority, The French Competition Authority publishes its market study on competition in the cloud computing sector, 29 juin 2023, e-Competitions June 2023, Art. N° 112999

[2] Autorité de la concurrence, Press Release, September 19, 2022

[3] Aymeric de Moncuit, Sarah Wilks, The French Competition Authority publishes its opinion on the cloud computing market outlining the risks to competition as the digital economy enters this new phase, 29 juin 2023, e-Competitions June 2023, Art. N° 120986

[4] The NIST Definition of Cloud Computing – Recommendations of the National Institute of Standards and Technology by Peter Mell and Timothy Grance, p. 2.

[5] Statista, ’Public Cloud – Worldwide, September 2023

[6] R.MEVEL,Markess by Exaegis forecasts a total cloud market of €27 billion in France by 2025, April 11, 2022.

[7] Nathalie Jalabert-Doury, Aymeric de Moncuit, Sarah Wilks, Camille Hoogterp, The French Competition Authority Publishes Its Opinion on the State of Competition in the Cloud Computing Sector, 29 June 2023, e-Competitions June 2023, Art. N° 114101

[8] Ibid.

[9] Laurence Idot, Cloud: The French Competition Authority Publishes a Major Opinion on the Competitive Functioning of Cloud Computing, June 29, 2023, Concurrences No. 3-2023, Art. No. 113387, pp. 77-78.)

[10] Markess by Exaegedis, Ronan Mevel, Ranking of Cloud Solution and Service Providers, September 17, 2024

[11] Alain Ronzano, Cloud: The French Competition Authority Issues Its Opinion on the Competitive Functioning of the Cloud Sector (Amazon, Google, Microsoft), June 29, 2023, Concurrences No. 3-2023, Art. No. 113054

[12] High Legal Committee of the Paris Financial Center, “Report on Banking Cloud: Status and Proposals,” May 2021, p. 22

[13] French Competition Authority, Market Study on Competition in the Cloud Computing Sector, Summary Opinion, 29 June 2023, Paragraph 401, p. 121

[14] Article 102 of the Treaty on the Functioning of the EU (the “TFEU”) and Article L420-2 para 1 of the French Commercial Code

[15] Article 101 Treaty on the Functioning of the EU (the “TFEU”) and Article L420-1 para 1 of the French Commercial Code

[16] French Commercial Code, art L420-2 para 2

[17] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) [2004] OJ L24/1

[18] Case C-449/21 Towercast, EU:C:2023:207

[19] French Commercial Code, Art. L420-2 para 2

[20] French Competition Authority, Decision No. 14-D-09 of September 4, 2014

[21] Alain Ronzano, Tying Practices: The European Commission Issues a Statement of Objections to a Major Technology Company for the Tying of Its Communication Software (Microsoft), June 25, 2024, Concurrences No. 4-2024, Art. No. 119346.)

[22] European Parliament and Council Regulation (EU) No 2022/1925 of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) No 2019/1937 and (EU) No 2020/1828 (Digital Markets Act) [2022] OJ L265/1

[23] Aymeric de Moncuit, Sarah Wilks, The French Competition Authority publishes its opinion on the cloud computing market outlining the risks to competition as the digital economy enters this new phase, 29 juin 2023, e-Competitions June 2023, Art. N° 120986

[24] International Competition Network Annual Conference, Barcelona, 18 October 2023

[25] European Council, ‘Data Act: Council adopts new law on fair access to and use of data’ (Consilium, 27 November 2023

[26] Laurence Idot, Cloud: The French Competition Authority Publishes a Major Opinion on the Competitive Functioning of Cloud Computing (Amazon, Google, Microsoft), June 29, 2023, Concurrences No. 3-2023, Art. No. 113387, pp. 77-78.)

[27] Aymeric de Moncuit, Sarah Wilks, The French Competition Authority publishes its opinion on the cloud computing market outlining the risks to competition as the digital economy enters this new phase, 29 juin 2023, e-Competitions June 2023, Art. N° 120986