The UK’s Competition and Markets Authority (CMA) has proposed designating Microsoft with “strategic market status” (SMS) in business software, the label that unlocks the regulator’s strongest digital competition powers. This is a provisional finding, not a final decision. The CMA will consult before deciding, and says designation “does not assume wrongdoing.”
In its announcement on 16 October, the CMA said it “is proposing to designate Microsoft with strategic market status (SMS) in its business software ecosystem and will now consult before making a final decision.” Alongside the proposal, it published an indicative roadmap of areas where it might act if Microsoft is designated.
What the CMA found
The investigation covered five areas of digital activity: “personal computer operating systems, productivity software suites, security software, server operating systems and relational database management systems”. The CMA says Microsoft’s business software, including Word, Excel, Outlook, PowerPoint, Teams and increasingly Copilot, “is used by over a million businesses and public sector organisations across the UK, with around 20 million monthly users.”
According to the regulator’s provisional findings:
- Microsoft has a strong position in each of the five areas.
- Its strength comes from the barriers customers face when switching, which limit their choice and weaken the constraint from other software developers.
- Its commercial practices and integration advantages can encourage customers to adopt its products, creating further barriers that rivals cannot easily overcome.
What could follow
The roadmap is not a list of decisions. It sets out where the CMA proposes to gather more evidence and consider possible action. The three examples it highlights are:
- “Assessing whether customers can freely choose the best AI tools and functionalities for their needs, and whether alternative AI providers have a level playing field to compete with Microsoft’s Copilot”
- “Examining whether the way Microsoft bundles and integrates its security products limits customer choice”
- whether customers have effective choice over which cloud they run their software licences on, and how Microsoft’s licensing practices affect that choice.
The CMA also says it wants to make it easier for developers to integrate their products with Microsoft’s ecosystem. If Microsoft is designated, the regulator could consider “conduct requirements or pro‑competition interventions”, subject to meeting the relevant legal tests.
Sarah Cardell, the CMA’s chief executive, 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 the CMA does designate Microsoft, “our focus would be on promoting competition and giving businesses greater freedom to choose and combine products in business software.”
Timeline: proposed, not final
The CMA opened the investigation on 14 May 2026 under Part 1 of the Digital Markets, Competition and Consumers Act 2024. It describes today’s findings as “provisional and subject to consultation before a final decision on designation is made by the February 2027 statutory deadline.”
The consultation runs until 5pm on 13 November 2026. The CMA says Microsoft has confirmed it will not use confidentiality agreements to stop other parties from responding. TSN has not found a public statement from Microsoft on the proposed decision.
The CMA also stresses that “SMS designation does not assume wrongdoing.” Designation would allow the regulator to impose targeted rules. It is not a finding that Microsoft has broken the law.
Cloud services: a separate track
The CMA also published an update on cloud services. This is separate from the SMS process. The CMA is monitoring steps that Microsoft and Amazon Web Services announced to give customers more choice. It lists progress including connecting their data centres with rivals “beginning with Google”, “completely removing data transfer fees for customers changing cloud providers”, a new way for competitors and customers to request interoperability, and AI tools to automate switching. The CMA says “more can be done”, is keeping a full SMS investigation into cloud under review, and will publish a further update in spring 2027.
Background
TSN reported in April on the moves that led to the May investigation. Today’s proposal is the second of the investigation’s three stages, with a final decision to follow after the consultation.
What this means
- The CMA has proposed, not decided, that Microsoft has strategic market status in UK business software. A final decision is due by February 2027.
- Designation would not be a finding of wrongdoing. It would let the CMA consider tailored rules, for example on whether rival AI tools can compete fairly with Copilot.
- Customers and rivals have until 13 November to respond, and Microsoft’s NDAs should not stop them doing so.
Sources
- CMA: CMA takes first steps to ensure choice in business software
- CMA: Microsoft’s business software ecosystem (case page)
- CMA: Proposed decision consultation
- CMA: Roadmap of possible interventions (PDF)
- CMA: Business software and cloud services
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