The CMA has initiated its fourth Strategic Market Status investigation concerning Microsoft.

      The UK’s Competition and Markets Authority (CMA) has initiated a Strategic Market Status investigation into Microsoft's business software ecosystem, marking its fourth case under the digital markets framework established in January 2025. This follows three previous designations concerning Google search, Apple mobile, and Google mobile in October. Microsoft’s case is broader than any that the CMA has previously handled, encompassing products such as Windows, Office (including Word and Excel), Teams, the expanding Copilot tool, server operating systems, database management systems, and security software.

      According to the CMA, Microsoft has over 15 million commercial users within this ecosystem in the UK, serving a multitude of businesses and public sector clients. The central issue the regulator is examining is whether Microsoft leverages its dominant position to restrict customer choice, focusing on familiar mechanisms including bundling, interoperability gaps, and default settings.

      An intriguing detail is found within the CMA’s prior cloud services investigation, which concluded in July 2025. This review highlighted that Microsoft was charging AWS and Google Cloud significantly higher wholesale prices for its software compared to the prices charged to its Azure customers. Although the inquiry group suggested SMS investigations into both Microsoft and AWS, the CMA Board chose not to pursue these, citing voluntary adjustments made by the companies regarding egress fees and interoperability terms.

      This current case effectively revisits Microsoft’s licensing issues under the CMA’s jurisdiction, through the lens of business software rather than cloud services. Sarah Cardell, the CMA’s chief executive, articulated the significance of the investigation: “Business software is a cornerstone of how the UK economy functions, encompassing small businesses, major public services, and infrastructure.”

      The wording indicates that SMS designation does not imply wrongdoing. Instead, it activates various tools available under the regime, including conduct requirements, pro-competition measures, and tailored remedies, bypassing the lengthy market investigation timeline that characterized previous inquiries.

      The investigation also explicitly mentions the AI aspect. The CMA is interested in whether competing AI providers can effectively integrate with Microsoft’s business software and whether the defaults set for Copilot in Office and Teams hinder other AI tools. This matter has been under scrutiny in Brussels for the last eighteen months, with the EU AI Act addressing it more procedurally. The CMA, as is typical, has opted for the SMS instrument first, followed by a public consultation.

      The procedural timeline is relatively quick by competition law standards, with responses to an Invitation-to-Comment due by 4 June. The investigation is expected to conclude within nine months, culminating in a designation decision by February 2027. A public consultation is slated before the final decision, with the CMA expressing interest in feedback from challenger AI firms, business software users, competitors in security software, and any entities that have encountered difficulties in integrating Microsoft’s productivity tools with alternatives.

      Microsoft’s response to this investigation will be made public in the upcoming month, and its latest position indicates a continued emphasis on competition effectiveness, claiming that its licensing amendments have already alleviated the CMA’s concerns. These arguments will be reiterated, although the CMA is now addressing them under a different statute and broader scope, with the ongoing £1bn UK class-action lawsuit regarding the same licensing issues providing a new evidentiary context not available in 2024.

      The outcome of this investigation will coincide with a shift in Copilot's adoption by UK businesses, as it transitions from the pilot phase to procurement.