Britain’s competition regulator has proposed placing Microsoft under tougher digital-market oversight over concerns about its grip on business software used by millions of UK customers.
The Competition and Markets Authority, or CMA, said Microsoft could be designated with Strategic Market Status in its business software ecosystem.
That designation would not automatically punish Microsoft.
But it would give the regulator stronger powers to impose targeted rules if it concludes that Microsoft’s market position is limiting competition, customer choice or access to rival services.
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CMA Focuses on Microsoft’s Software Ecosystem
The CMA opened its investigation in May.
It is examining Microsoft’s position across products and services including Windows, Microsoft 365, Word, Excel, Teams and the Copilot AI assistant.
Around 20 million people in the UK use Microsoft business software each month.
The regulator’s concern is not simply that Microsoft is large.
It is looking at how different Microsoft products work together and whether customers become effectively locked into the company’s wider ecosystem.
A business using Windows, Microsoft 365, Teams and Microsoft cloud services may find it easier to add another Microsoft product than switch to a rival provider.
That integration can make services more convenient.
But regulators worry it can also make competition harder if customers face technical, contractual or financial barriers when they want to move elsewhere.
The CMA is now consulting on its proposed decision until November 13.
A final decision is expected by February 13, 2027.
What Strategic Market Status Means
Strategic Market Status, or SMS, is part of Britain’s newer digital competition regime.
It is designed for companies that have substantial and entrenched market power in digital activities.
An SMS designation does not mean a company has automatically broken competition law.
Instead, it allows the CMA to impose specific conduct requirements tailored to the company and market.
For Microsoft, that could eventually mean rules affecting how it bundles products, structures licences or allows competing services to work with its software.
The regulator could also look at whether businesses can move data and workloads more easily between providers.
Another area under scrutiny is Microsoft’s growing use of Copilot across its productivity products.
If AI assistants become deeply embedded in widely used business software, access to those systems could strengthen an existing platform’s market position even further.
That is why the CMA is examining AI competition alongside traditional productivity software.
Bundling and Switching Become Key Questions
One of the issues regulators are examining is bundling.
Bundling happens when several products are sold together rather than separately.
For example, a company might buy a Microsoft package that includes Word, Excel, Outlook and Teams.
That can reduce complexity and sometimes lower costs.
But smaller competitors may struggle if customers receive rival-like services automatically inside a package they already pay for.
Microsoft has faced similar competition concerns before.
The European Commission investigated the bundling of Teams with Microsoft 365 after complaints from rival Slack.
Microsoft later agreed to separate Teams from some business software packages in Europe.
The UK investigation is broader.
It considers whether Microsoft’s entire business software ecosystem gives it a long-term advantage that competitors may find difficult to challenge.
The CMA is also studying customer switching.
Businesses can face significant costs when changing productivity software because employees must be retrained, files may need migration and internal systems may depend on Microsoft formats or tools.
These barriers can create what regulators call lock-in.
AI Could Strengthen Existing Software Power
Copilot adds a new dimension to the competition debate.
Microsoft has embedded AI tools across Word, Excel, Outlook, Teams and other services.
That gives it access to an enormous existing customer base without having to persuade users to adopt an entirely separate AI product.
The CMA wants to understand whether that advantage could make it harder for competing AI services to reach business users.
The issue is becoming more important as AI assistants evolve from simple chat tools into systems capable of drafting documents, analysing spreadsheets, joining meetings and carrying out business tasks.
If companies eventually depend heavily on one AI assistant across their entire workplace software stack, switching could become even more difficult.
Microsoft disputes the suggestion that its ecosystem harms competition.
The company argues that its products are open, interoperable and widely chosen because they offer value to customers.
The regulator will consider Microsoft’s response before reaching its final decision.
UK Tightens Oversight of Major Technology Platforms
The proposed designation is part of a wider UK effort to regulate companies with powerful digital platforms.
Google and Apple have already faced Strategic Market Status scrutiny under Britain’s Digital Markets, Competition and Consumers Act.
The CMA has also examined competition in cloud computing, where Microsoft and Amazon Web Services dominate much of the UK market.
The regulator said both companies have recently taken steps to make multicloud use and provider switching easier, though it believes further work is needed.
Microsoft’s business software investigation could therefore become another major test of Britain’s new digital competition regime.
If the SMS designation goes ahead, the next stage will be deciding what specific interventions are necessary.
What this means for you:
Businesses using Microsoft software could eventually get more flexibility to choose rival tools or move between providers. The biggest changes would only come if the CMA formally designates Microsoft and later imposes specific conduct rules.
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