FTC Investigating Amazon’s Cloud Computing Unit For Possible Antitrust Violations

The U.S. Federal Trade Commission has expanded its scrutiny of Amazon (AMZN) to include an investigation of the practices of its huge cloud-computing business, known as Amazon Web Services.

The commission, which has been investigating Amazon’s massive online retail business, is now seeking to find out if the company has violated antitrust laws and unfairly hurt competitors.

Bloomberg reported Amazon Web Services, which is much larger than its closest rival, Microsoft’s (MSFT) Azure, “dominates the market for foundational cloud-computing technology that provides the storage and computing power needed to run applications.”

Gartner Inc., a global research and advisory firm, estimated Amazon Web Services controls 48% of that market, versus a 16% share for Microsoft.

For the most recent period, the Amazon Web Services unit accounted for some 60% of Amazon’s operating income.

The commission may be looking at whether Amazon discriminates against software companies that sell their products to clients of Amazon Web Services, while concurrently competing with Amazon. Investigators are likely concerned Amazon might have an incentive to punish companies that work with other cloud providers in favor of those that work exclusively with Amazon.

Amazon competes with hundreds of other software firms of all sizes which offers such products and services as databases, machine-learning tools and data-warehousing.

Nathaniel Mott, writing for Tomshardware.com, put Amazon Web Services’ practices this way: “It's kind of like a parent helping their kid make some lemonade to sell on a hot summer day and then making some lemonade to sell by themselves. The kid probably wouldn't like that, but what other choice do they have?”

Mott added: “The products themselves aren't important. What matters is the concern that Amazon offers platforms that other businesses rely on while simultaneously using those platforms itself.”

Meanwhile, Amazon Web Services continues to expand and add more services – accumulating more than 175 services for customers, up from more than 100 services two years ago and 140 in 2018.

At the recent AWS Reinvent conference in Las Vegas, Amazon unveiled new chips to run customers’ applications in its data centers, among other products, including more powerful processors, a new Wave Length service, and fraud detector.

“There are a lot of companies out there that are check-box heroes, who rush out and copy many of our features,” said Andy Jassy, the CEO of Amazon Web Services. “But our broader and deeper options in machine learning and data analytics give us an advantage. Customers think we are a couple of years ahead.”

The global cloud infrastructure market is huge and expected to keep growing -- Forrester Research said it expects this market will triple in value to $133 billion over the next three years.

“I’m not surprised by our success, but how fast it took place,” Amazon Web Services chief technology officer Werner Vogels told MarketWatch.

Speaking in Las Vegas, Jassy also criticized President Donald Trump and his administration for having awarded a $10 billion Pentagon cloud contract to Microsoft. (Amazon has challenged this in court).

“We have a president who has shown a clear disdain for a company and its CEO,” Jassy said, referring directly to Trump’s attacks on Amazon CEO Jeff Bezos. “It [the contract] was not adjudicated fairly, and we believe there was a fair amount of political interference.”