The burgeoning fields of cloud computing and artificial intelligence (AI) are rapidly transforming the digital landscape, prompting calls for proactive regulation to prevent market dominance by a few powerful players. Andreas Schwab, a German Member of the European Parliament (MEP), argues that the European Union’s Digital Markets Act (DMA), a landmark piece of legislation designed to curb anti-competitive practices by large tech platforms, should be extended to encompass these crucial sectors. Schwab emphasizes the need for a unified European strategy to counter the digital prowess of the United States and China, warning that inaction risks ceding control of these vital technologies to a handful of dominant corporations, ultimately limiting consumer choice and stifling innovation. He stresses the immense potential of both cloud and AI, advocating for their inclusion as core platform services under the DMA before these markets become entrenched under the control of a few giants with the deepest pockets.
The DMA currently targets 24 core platform services offered by designated “Gatekeepers”—companies like Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, and Booking—deemed sufficiently large to warrant regulatory scrutiny. However, cloud and AI services, despite their explosive growth and increasing importance, remain outside the DMA’s scope. This regulatory gap raises concerns about potential market distortions and anti-competitive behavior. The UK’s Competition and Markets Authority (CMA) has already highlighted the dominance of Amazon and Microsoft in the cloud sector, noting their sustained profitability significantly exceeding their cost of capital. The CMA also acknowledged the potential for large-scale investments by these giants to deter market entry and stifle competition, reinforcing the need for regulatory oversight.
The cloud computing market is characterized by intense competition among tech behemoths. Google, the third largest player after Amazon and Microsoft, has even lodged a complaint with the European Commission accusing Microsoft of anti-competitive practices aimed at locking customers into its Azure cloud platform. Schwab argues that switching cloud providers is inherently complex due to the deep integration of customer data and systems, highlighting the potential for vendor lock-in and reduced consumer choice. While cloud computing services are currently monitored under the DMA, none have yet met the thresholds for designation as core platform services, underscoring the need for continuous evaluation and potential adjustments to the regulatory framework.
The rapidly evolving landscape of AI presents even greater challenges for regulators. The ambiguity surrounding its classification as a service or a technology complicates its inclusion within the DMA’s scope. Some argue that AI, as an underlying technology powering various digital applications and services, including core platform services like search engines and social networks, should not be directly regulated. Instead, they suggest focusing on the specific services that utilize AI. However, Schwab emphasizes the increasing interdependence of cloud and AI, with most AI services relying on cloud infrastructure, suggesting that addressing AI within the regulatory framework is becoming increasingly urgent.
The nascent AI market is also witnessing intense competition and significant investment, particularly from the United States and China. American companies, led by Microsoft-backed OpenAI’s ChatGPT, currently dominate the market, followed by Microsoft’s Copilot and Google’s Gemini. The emergence of new players, such as China’s Deepseek, further underscores the dynamic nature of this sector and the need for proactive regulatory measures. Schwab acknowledges the current complexities of regulating AI, recognizing that while cloud services are already significantly integrated with gatekeeper platforms, AI’s integration is still developing. Nevertheless, he urges swift consideration of AI regulation, mirroring the approach taken with cloud services, to prevent potential market distortions and ensure fair competition.
The debate surrounding the regulation of cloud and AI services underscores the challenges of adapting existing legal frameworks to the rapidly evolving digital landscape. Balancing the need to foster innovation and competition with the imperative to prevent market dominance by a few powerful players requires careful consideration and proactive measures. The European Union’s DMA represents a significant step towards addressing these challenges, but its effectiveness hinges on its ability to adapt to emerging technologies and market dynamics. The calls for including cloud and AI within the DMA’s scope reflect the growing recognition of their strategic importance and the potential for anti-competitive practices to stifle innovation and limit consumer choice. The ongoing discussions and potential expansion of the DMA’s scope will undoubtedly shape the future of the digital economy and the competitive landscape for cloud and AI services.
