The UK’s Competition and Markets Authority (CMA) has proposed giving Microsoft a special regulatory designation for its business software ecosystem, citing concerns that customers may face difficulties switching providers or combine products from competing technology companies.
The proposal, announced on Friday, 16 October 2026, follows an investigation into Microsoft’s position in software used by businesses and public-sector organisations.
According to the CMA’s official announcement, Microsoft products are used by more than one million UK businesses and public-sector organisations, with around 20 million monthly users.
The regulator believes Microsoft’s strong position across several areas of business software, together with barriers to switching and advantages from integrating its own products, may weaken competition.
The CMA is now consulting on whether Microsoft should receive strategic market status (SMS), a designation that could allow targeted regulatory intervention.
No final designation has been made, and the proposal does not establish that Microsoft has broken competition law.
Why the CMA is examining Microsoft’s business software
Microsoft provides a wide range of software used in British workplaces, including Word, Excel, Outlook, PowerPoint, Teams and its Copilot artificial intelligence tools.
Its wider business software ecosystem also includes Windows, server operating systems, security products and database management systems.
These products support daily operations in private companies, government departments and other public services.
The CMA’s provisional findings suggest that Microsoft’s position across these connected services gives it significant advantages over competitors.
For example, organisations may find it difficult or expensive to move away from products already used throughout their operations.
Companies offering competing software may also struggle to integrate their products with Microsoft’s systems on equal terms.
The regulator is concerned that these conditions could limit customer choice and reduce pressure on suppliers to improve services or offer competitive prices.
However, the findings remain provisional and are subject to consultation.
What strategic market status would mean
Strategic market status is part of the UK’s digital markets competition regime, introduced under the Digital Markets, Competition and Consumers Act 2024.
It allows the CMA to identify technology companies with substantial and entrenched market power in specified digital activities, provided the statutory conditions are met.
A designation would not automatically mean that Microsoft had engaged in unlawful conduct.
Instead, it could give the regulator powers to consider proportionate requirements designed to address identified competition concerns.
Any such measures would require further assessment and compliance with the relevant legal tests.
The CMA could decide to introduce conduct requirements governing particular business practices or consider other interventions intended to improve competition.
The designation itself would not automatically prohibit Microsoft’s existing software bundles, licensing arrangements, or integration of Copilot into its products.
Software bundles and rival AI tools under scrutiny
The CMA has published an indicative roadmap identifying areas where it may gather further evidence and consider action if Microsoft receives strategic market status.
According to the regulator’s Microsoft investigation page, those areas include software bundling, interoperability, access for competing artificial intelligence services and licensing arrangements.
One concern is whether organisations can combine Microsoft software with products supplied by other companies without unnecessary technical or commercial obstacles.
This is becoming increasingly important as businesses adopt AI assistants and other automated tools.
The CMA wants customers to have meaningful opportunities to choose AI services that best meet their needs, rather than being limited by the software ecosystem they already use.
The regulator may also examine whether Microsoft’s licensing practices affect competition when businesses run software through competing cloud providers.
These are potential areas for future intervention, not restrictions that have already been imposed.
Separate work continues on cloud services.
Alongside the Microsoft business software investigation, the CMA has reported progress in its engagement with Microsoft and Amazon Web Services regarding competition in cloud computing.
Cloud services allow organisations to store data and run applications using computing infrastructure provided by external companies.
The regulator has been examining barriers that make it difficult for customers to switch cloud providers or use services from more than one supplier.
In its March 2026 announcement on business software and cloud services, the CMA outlined commitments and improvements concerning cloud data transfer charges and interoperability.
The latest update says both companies have taken material steps to improve customer choice, including work intended to make switching and using multiple cloud services easier.
However, the CMA believes further improvements are necessary, particularly in identity and access management and the portability of cloud systems.
It expects to publish another update on this separate work in spring 2027.
Consultation open until November.
The CMA has invited businesses, technology companies, public-sector organisations and other interested parties to comment on its proposed decision.
Responses must be submitted by 5 p.m. on Friday, 13 November 2026.
The regulator will review the evidence and consultation responses before deciding whether Microsoft meets the legal conditions for strategic market status.
Its statutory deadline for issuing a final designation decision is 13 February 2027.
If Microsoft is designated, the CMA could then consider specific competition measures through further regulatory processes.
For now, Microsoft has not been designated in this investigation, and no new Microsoft-specific conduct restrictions have taken effect as a result of the 16 October proposal.
The outcome will determine whether the regulator gains additional powers to address concerns about competition and customer choice in Microsoft’s business software ecosystem.
