The European Commission on Thursday preliminarily designated US cloud giants Amazon and Microsoft for regulation under the bloc’s Digital Markets Act (DMA).

In a press statement, the Commission said that Amazon’s web services (AWS), the largest EU cloud provider, and Microsoft’s Azure, the second-largest, acted as “crucial” gateways between businesses and consumers, despite not meeting the quantitative thresholds set by the DMA.

In justifying the designation, the Commission said that Microsoft and Amazon’s cloud services have achieved a significant turnover. It also found that their operational capacity and investments “significantly outpaced those of competitors.” Moreover, the services appeared to benefit from “lock-in effects” and “high switching costs” due to their size.

The bloc also said that both services’ AI tools and partnerships are decisive factors in the cloud procurement market because AI is increasing demand for cloud-related services, benefiting both companies.

Tech Commissioner Henna Virkkunen said in a statement that cloud services “have become a cornerstone of Europe’s economy – and a prerequisite for AI,” adding that more than half of European firms now rely on them.

Microsoft and Amazon can still contest the designation, meaning that a final determination is still pending.

The bloc announced its investigation into the two cloud services last November under the DMA, saying that it aimed to conclude the final investigation within 12 months. That means a final decision from the Commission is expected this November.

“The cloud sector in Europe is innovative, highly competitive and an accelerator for growth across the economy. We remain concerned that ignoring the growing power of Google Cloud and Gemini will tilt the market in a harmful way,” it added.

They also criticised the designation of cloud services under the DMA, adding that the bloc “already has comprehensive cloud regulation.”

(cm)