The UK's competition watchdog wants to designate Microsoft with strategic market status (SMS) in business software, allowing the regulator it to intervene to level the playing field, and says it is considering other areas for investigation. Regulators around the world are watching to see what the UK decides in this case, with bodies such as the US Federal Trade Commission (FTC) and the European Commission mulling similar actions. The Competition and Markets Authority (CMA) is opening a consultation on whether to tag the Redmond software giant with strategic market status in respect of its portfolio of business software applications.

This follows an investigation the regulator started back in May into Microsoft’s software portfolio including Word, Excel, Outlook, PowerPoint and Teams, plus its security, server and operating systems. The watchdog is also probing whether Microsoft enjoys a position of “substantial and entrenched market power” through the suite of software that could be seen as stifling competition and harming buyer choice. It lays out its proposed decision in a document [PDF] and is inviting comments that must be submitted by November 13.

The CMA will make its final decision by February 13, 2027. Bargain spotter The CMA makes it clear the company holds a strong position in each of the five areas it investigated (personal computer operating systems, productivity software suites, security software, server operating systems and relational database management systems), and that customers face barriers when switching providers – limiting their choice and weakening the ability of other software developers to offer rival products. Its proposal document notes Microsoft has been by far the largest provider of business software in the UK for decades.

It finds that many customers view Microsoft's portfolio as a unified software environment, forming an end-to-end, integrated stack which makes for easier technical integration between products, with discounted pricing for buying whole bundles of applications together. This makes customers less likely to adopt products from alternative providers that may offer similar or superior functionality, as doing so would duplicate licensing costs for products already in their Microsoft bundle, the CMA says.

“Organizations should be able to choose the products that work best for them, switch provider when they want to and combine services from different suppliers. We want to ensure businesses have the freedom to choose how they use Microsoft’s products alongside alternatives,” said CMA chief exec Sarah Cardell. Finding that the criteria for SMS designation are met would not imply or assume wrongdoing on Microsoft’s part, the regulator stresses.

A separate document [PDF] spells out the potential interventions that the CMA could make. These include ensuring that Microsoft’s technical design choices do not restrict the ability to use other providers; that commercial arrangements (like bundling) do not limit effective competition; and preventing Microsoft from using its market power in business software to distort competition in adjacent activities, such as cloud services. Rivals back licensing scrutiny Cloud providers previously complained that Microsoft's licensing terms make it more costly for companies to deploy Windows Server instances and services such as SQL Server on non-Microsoft clouds.

The proposed SMS designation grew out of the CMA’s investigations into whether the big global players were having a negative impact on the cloud services market in the UK. This largely fizzled out with the watchdog securing undertakings from Microsoft and Amazon Web Services (AWS) that they would work to reduce barriers to switching between clouds and operating multi-cloud deployments.

In an update, the CMA says that more can be done to address barriers to switching between cloud providers and using multiple cloud services, and it will continue to work with AWS and Microsoft to address them. It also says it its looking into whether customers can freely choose the best AI tools, and whether alternative AI providers have a level playing field to compete against Copilot.

In a statement sent to The, Microsoft said it does not share the CMA’s views in its proposed decision on business software solutions. “All our products - including Copilot - are open and interoperable, giving customers the ability to use them alongside competing services and choose solutions that work best for them at attractive prices. We will continue engaging constructively to ensure UK customers and businesses carry on benefiting from robust competition,” a spokesperson told us.

However, some pressure groups were quick to signal their approval. The Browser Choice Alliance said it welcomes the CMA’s proposed decision, adding that: “BCA members have long experienced how Microsoft leverages its market power from Windows and productivity software to push users towards its Edge browser, even where they’re trying to use an alternative.”The Open Cloud Coalition, which counts Google as a member, said: “Microsoft’s restrictive software licensing practices distort competition in the cloud, harm choice, and increase costs. This once-in-a-generation opportunity to end these practices can strengthen competition and lower customer costs, if the CMA acts quickly and decisively.” ®