UK watchdog launches Microsoft business software investigation

CMA will consider whether Microsoft should receive 'strategic market status'

Britain's competition watchdog has opened a major investigation into Microsoft over concerns its business software practices may be limiting competition and restricting customer choice in the growing market for AI and cloud services.

The UK's Competition and Markets Authority (CMA) said it would examine whether Microsoft's dominance in workplace software gives it an unfair advantage over rivals through the way its products are bundled, integrated and configured by default.

The regulator will consider whether Microsoft should receive "strategic market status" (SMS), a designation under the UK's new digital competition rules that allows the CMA to impose targeted measures on a company deemed to hold entrenched market power.

In a statement announcing the probe, the CMA said it wanted to ensure British organisations could "access the best tools in the market" and combine software and AI services from different providers without facing technical or financial barriers.

The investigation will focus on several areas of Microsoft's business software portfolio, including productivity applications, operating systems, database software and cybersecurity products.

Officials are particularly concerned that Microsoft's ecosystem - built around products such as Windows Server, SQL Server and Microsoft 365 - may make it harder for competing software and AI providers to integrate effectively with widely used business systems.

The CMA said it would also examine whether default settings and licensing arrangements discourage customers from switching to rival suppliers or using alternative cloud platforms.

Cloud computing industry

The decision marks the latest escalation in the regulator's scrutiny of the cloud computing industry, where Microsoft and Amazon have emerged as dominant players.

Last year, the CMA concluded that Microsoft Azure and Amazon Web Services (AWS) each accounted for between 30% and 40% of UK spending on infrastructure-as-a-service cloud computing.

The regulator warned that the market had become highly concentrated, with significant barriers preventing customers from moving between providers.

The watchdog previously raised concerns that Microsoft's licensing policies could make it more expensive or technically difficult for businesses to run Microsoft software on competing cloud services such as AWS or Google Cloud.

In March, Microsoft and AWS agreed to reduce some cloud egress fees and improve interoperability measures after discussions with the CMA, helping the companies avoid more immediate regulatory intervention.

Sarah Cardell, chief executive of the CMA, said business software formed "a cornerstone of how the UK economy functions".

"Our aim is to understand how these markets are developing, Microsoft's position within them and to consider what, if any, targeted action may be needed to ensure UK organisations can benefit from choice, innovation and competitive prices," she said.

Implications for AI

The investigation will also examine the implications for AI, an area where regulators increasingly fear dominant technology firms could strengthen their market positions by embedding AI tools deeply into existing software ecosystems.

Competition experts say the probe could have broad implications for the future of enterprise AI in Britain, particularly if the CMA concludes that alternative AI models and services are being disadvantaged within Microsoft-controlled environments.

A spokesperson for Microsoft said the company was "committed to working quickly and constructively with the CMA to facilitate its review of the business software market".

The investigation is expected to last nine months and will gather evidence from customers, rival firms and technology challengers before a final decision is reached by February 2027.