The UK’s Competition and Markets Authority (CMA) has officially initiated a major investigation into Microsoft’s business software ecosystem. This move aims to determine whether the tech giant should be designated with “strategic market status” (SMS) under the country’s new digital markets regime. This designation is reserved for companies with substantial and entrenched market power, allowing regulators to impose specific conduct requirements to ensure fair play.
The scope of the probe is vast, covering ubiquitous tools such as Windows, Word, Excel, Teams, and the increasingly integrated AI assistant, Copilot. With more than 15 million commercial users in the UK alone, Microsoft’s software serves as the digital backbone for hundreds of thousands of businesses and public sector organizations. The CMA is particularly concerned with how Microsoft’s dominant position might influence the rapidly evolving AI sector, especially as “agentic AI” becomes a standard feature in workplace productivity tools.
Central to the investigation are allegations that Microsoft may be using restrictive practices to stifle competition. The regulator is examining whether the bundling of services, lack of interoperability with third-party software, and default settings are preventing customers from switching to rivals or mixing and matching the best available tools. There is a specific focus on whether challenger tech firms and AI competitors can effectively integrate their services with Microsoft’s established platforms.
Sarah Cardell, Chief Executive of the CMA, emphasized that business software is a cornerstone of the UK economy and that the investigation will seek to ensure these markets remain competitive and innovative. A final decision on the SMS designation is expected by February 2027. If Microsoft is designated, the CMA could intervene by mandating changes to software licensing practices—an issue previously flagged in investigations into the cloud market—to promote better outcomes for UK businesses and consumers. The CMA has opened an invitation for stakeholders, including rivals and customers, to provide evidence on how these market dynamics affect their daily operations.
