The Competition and Markets Authority has launched a strategic market status (SMS) investigation into Microsoft’s business software ecosystem and set out details of what the investigation will cover. This is the fourth SMS investigation opened by the CMA since the UK’s digital markets competition regime came into force in January 2025.
The CMA says that Microsoft’s business software (such as Windows, Word, Excel, Teams and increasingly Copilot) is key to the productivity of the UK economy.
The business software sector is changing rapidly, with increased AI functionality and a shift towards agentic AI in familiar workplace tools. It is important that customers can access the best tools in the market, and mix and match software and AI services from a broad range of competing suppliers and so that competition in business software is working well.
The CMA has heard evidence that UK customers may not always be able to effectively combine software from Microsoft with that of other providers, limiting their ability to get access to the best products at the most competitive prices. Consequently, its investigation will examine whether Microsoft has SMS in business software and consider whether it can use that position to limit customer choice. It will assess whether bundling of products, limits in interoperability or default settings can prevent customers switching and weaken the competitive constraints Microsoft faces from rivals. This includes looking at how AI competitors can integrate with Microsoft’s business software, giving customers access to AI software across suppliers to best suit their needs.
The investigation will examine Microsoft’s provision of a range of business software products used by UK organisations, including productivity software, personal computer and server operating systems, database management systems and security software.
An SMS designation would also allow the CMA to consider whether to intervene on a key concern from its cloud market investigation, particularly Microsoft’s use of software licensing, which was found to be reducing competition in cloud services.
The CMA says that it will take a proportionate and transparent approach to this investigation which must be completed within nine months. It will carry out engagement with customers, rivals and challenger tech as well as with Microsoft itself. It will reach its decision on whether to designate Microsoft with SMS by February 2027. The CMA will consult publicly before reaching that decision.
Alongside the SMS investigation, the CMA announced in March that it is engaging with a broad range of stakeholders to ensure that AWS and Microsoft are delivering on steps they announced to support customer choice in cloud, and to identify what other action may be needed.
