UK regulator proposes strategic market status for Microsoft in business software

The Competition and Markets Authority (CMA), the UK competition regulator, proposed on 16 October 2026 to designate Microsoft with strategic market status (SMS) in its business software ecosystem. It will consult before taking a final decision. The CMA also published an indicative roadmap of areas where it could intervene if the designation goes ahead.

According to the CMA, over a million businesses and public sector organisations in the UK use Microsoft’s business software, with around 20 million monthly users. The products covered include Word, Excel, Outlook, PowerPoint, Teams and, increasingly, Copilot, along with Microsoft’s security, server and operating system products.

What the CMA found

The regulator said its findings are provisional. It found that Microsoft has a strong position in all five areas of digital activity it investigated: personal computer operating systems, productivity software suites, security software, server operating systems and relational database management systems. It said Microsoft’s strength comes from the barriers customers face when switching. It added that commercial practices and integration advantages can encourage customers to adopt Microsoft’s products, creating further barriers that other software developers cannot easily overcome.

The CMA said an SMS designation does not assume wrongdoing. If Microsoft is designated, the regulator could impose conduct requirements or pro-competition interventions, subject to the relevant legal tests.

Areas for possible action

The CMA said it will look at how Microsoft bundles its software and at making it easier for developers to integrate their products with Microsoft’s ecosystem. Among the areas it named for further evidence gathering are three. The first is whether customers can freely choose AI tools and whether rival AI providers have a level playing field to compete with Copilot. The second is whether the way Microsoft bundles and integrates its security products limits customer choice. The third is whether customers can choose which cloud to deploy their software licences on, and how Microsoft’s licensing practices affect that choice.

Sarah Cardell, Chief Executive of the CMA, said: “Organisations should be able to choose the products that work best for them, switch provider when they want to and combine services from different suppliers.” She added that if Microsoft is designated, the CMA’s focus “would be on promoting competition and giving businesses greater freedom to choose and combine products in business software.”

According to Reuters, a Microsoft spokesperson said the company did not share the CMA’s views in its proposed decision. The spokesperson said Microsoft’s products, including Copilot, are open and interoperable and can be used alongside competing services.

Background and timetable

The CMA board decided in March 2026 to open the investigation, and it formally began on 14 May 2026 under the Digital Markets, Competition and Consumers Act 2024. It was the fourth SMS investigation since the UK’s digital markets regime came into force in January 2025. The CMA said at the time that a designation would let it address a concern from its 2025 cloud services market investigation: Microsoft’s use of software licensing, which the regulator found was reducing competition in cloud.

Reuters reported that Microsoft would become the third company to receive SMS status in the UK if the proposal goes through. Google was designated in online search and in mobile platforms, and Apple in mobile platforms, all in October 2025.

The CMA’s indicative timetable shows the consultation closing in November 2026. Microsoft will then have an opportunity to make oral representations. The statutory deadline for the final decision notice is 13 February 2027.

Cloud services

The CMA also gave an update on its separate work with Microsoft and Amazon Web Services (AWS) on cloud services, which is taking place outside a formal designation process. It said both companies have connected their data centres with rivals, beginning with Google. They have also removed data transfer fees for customers changing cloud provider and reduced those fees for customers who use more than one provider. Both have introduced a mechanism for competitors and customers to request greater interoperability, and both are rolling out AI tools that automate technical steps in switching.

The regulator said more can be done to remove barriers to switching. It has agreed with both companies to focus next on identity and access management across clouds. The CMA said it is keeping a possible full SMS investigation under review and will publish a further update in spring 2027.

Kai Times could not verify two pieces of information with a primary source: the Microsoft spokesperson’s statement, and that Microsoft would be the third company designated, along with the earlier designations of Google and Apple. Both come only from the Reuters report.