Last week, the European Commission (Commission) gave shape to inchoate fears of Digital Markets Act (DMA) “mission creep,” as it issued a preliminary recommendation to designate Amazon’s and Microsoft’s cloud services as DMA “gatekeepers.” Even against a backdrop of steadfast refusals to observe its own legal restraints under DMA, the Commission’s attempted expansion of DMA stands out. The Commission managed just a page and a half—and still got the law, the facts, and the interests of European startups wrong.
DMA is Not Intended for Inputs Like Cloud Services. Even setting aside DMA’s failure to promote competition, the law itself limits the applicability of gatekeeper status to services that are “an important gateway for business users to reach end users.” Cloud services do not serve as a gateway between business users and end users. Startups and small tech businesses typically purchase services from a menu of options from cloud providers, depending on their needs.
Examples of these services include infrastructure as a service (IaaS), allowing flexible access to rented compute capacity, storage, and networking tools; platform as a service (PaaS), providing ready-to-use software development environments; and managed artificial intelligence (AI) model access, allowing startups to create their own services and tools using foundation and large language models (LLMs). These services are examples of “inputs” that businesses must purchase in order to provide their own services. They are distinct from marketplaces, search platforms, or other kinds of platforms that facilitate and manage business-to-consumer relationships.
The Commission’s preliminary position says nothing at all about how cloud services serve this gateway function. In designating a new gatekeeper, the Commission has flexibility on some elements. For example, even if a gatekeeper does not meet the market share threshold set forth in the statute, it can provide other evidence of a proposed “gatekeeper’s” dominance in a given market. However, it is not free to disregard or override the statutory provision limiting “gatekeepers” to those that serve as an important “gateway between business users and end users.” This is a glaring defect in the preliminary position and should be fatal to a final decision that fails to address it.
Markets for Cloud Services are Dynamic and Competitive. The Commission’s preliminary position argues that both Microsoft and Amazon have “vast and entrenched user bases and appear to benefit from lock-in effects and high switching costs.” But European cloud customers are not locked in or entrenched. According to a Deloitte report, 73 percent of European businesses report that they use multiple cloud services. In a separate survey, 83 percent said a multi-cloud strategy “yields more negotiating power and flexibility” with cloud providers.
Likewise, the current snapshot of competition in cloud services indicates healthy competition, but the future holds even more dynamism thanks to strong investment up and down the technology stack. A Copenhagen Economics report lists 227 EU cloud services companies currently active, noting that several of them have “announced investments totaling more than 45 billion euro in the coming years, including various investments by SAP,” StackIT, and Nebius. While the U.S. regulatory environment has enabled cloud companies to provide more services at scale in the EU, European competitors are present and investing in growth.
These conditions illustrate that cloud services customers have bargaining power, and they use it effectively, directly refuting the Commission’s claim that customers are locked in and cannot switch. The competitive conditions in markets for cloud services benefit small business innovators, and the lock-in the Commission imagines is illusory.
Application of DMA Provisions to Cloud Services Would Eliminate Competition. The Commission’s preliminary position risks repeating the DMA’s pattern of denying European consumers access to new technologies—this time in the cloud. Among other provisions, the DMA’s prohibition on self-preferencing and its mandate to provide unrestricted access to core platform software and hardware features are demonstrated investment killers. Even worse, European startups and small tech entrepreneurs bear measurable costs when DMA provisions snatch away the latest innovations enjoyed by the rest of the world. Our survey of these companies estimated that these businesses lose $109,000 to $528,000 annually due to these delays—a disadvantage that only compounds as competitors overseas race ahead.
The Commission’s preliminary position is legally deficient, factually unsupported, and harmful to the very businesses DMA was ostensibly designed to protect. European startups and small tech companies depend on competitive, innovative cloud markets—and those markets are delivering. Subjecting cloud services to DMA’s blunt regulatory instruments won’t sharpen competition; it will dull the incentives that make it work. The Commission should withdraw its preliminary position and resist the temptation to stretch DMA beyond its legal limits. More mission creep means more delays, more costs, and more ground lost to competitors outside Europe who face no such constraints. American policymakers should see the move for what it is: another flavor of its more direct attempts to kneecap American tech competitors. What is less obvious is just how costly it will be for startups based in the EU, the U.S., and around the world.