The Competition and Markets Authority has proposed designating Microsoft with strategic market status in the UK’s business software market, a step that would subject the US technology group to tougher regulatory oversight. A final decision is due in February.
The designation could open the way for interventions targeting Microsoft’s practice of bundling its software into a single package.
Strategic market status, or SMS, is a designation under the UK’s digital markets competition regime. It does not imply wrongdoing, but means a technology company has “substantial and entrenched market power” in the UK. It gives the regulator the opportunity to impose targeted interventions to improve choice and competition in the market.
The CMA has been investigating Microsoft since May. In an update, the regulator said the company had a “strong position” across each of the areas of digital activity it investigated, including productivity software suites and personal computer operating systems.
Microsoft’s suite of software tools includes Word, Excel, Teams and Copilot. The CMA said the company’s strength in the market came from “the barriers customers face when switching”.
Sarah Cardell, chief executive of the CMA, said: “We want to ensure businesses have the freedom to choose how they use Microsoft’s products alongside alternatives.”
The regulator will gather further evidence on the state of the market over the coming months. According to the indicative timetable on the CMA’s case page for the investigation, consultation on the proposed decision is expected to close in November, and the statutory deadline for issuing any SMS decision notice is 13 February 2027.
The CMA said it would investigate whether the way Microsoft bundles its software products into a single package might limit consumer choice. The regulator is concerned that bundling might put customers off buying an alternative when certain features are already included in Microsoft’s package.
It will also assess whether customers can freely choose the best artificial intelligence tools, and whether alternative AI providers have a “level playing field” on which to compete against Copilot.
The CMA said: “UK customers will benefit most when they can access the best tools in the market and mix-and-match software and AI services from a broad range of competing suppliers.”
The regulator said its investigation would further the UK’s push to develop greater digital sovereignty. “The ability to choose, switch and combine digital services (especially AI), without being overly dependent on a single technology provider, is also increasingly important for resilience and strategic autonomy,” it said.
Microsoft said it disagreed with the proposal. “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,” a spokesperson said.
If the CMA goes ahead, Microsoft would be the third technology company to be designated with strategic market status. Google was given the designation for its position in the search market, and in October 2025 the regulator confirmed SMS designations for Apple and Google in their mobile platforms.
Microsoft’s software licensing has drawn scrutiny in the UK before. In 2023, Amazon and Google complained to the CMA about Microsoft’s cloud licensing, saying its practices restricted customer choice, an allegation Microsoft rejected at the time.
In October 2025, a £2bn collective action against Microsoft was brought at the Competition Appeal Tribunal on behalf of businesses that ran Windows Server on rival cloud platforms, alleging they had been overcharged. Microsoft has defended its licensing models as pro-competitive.
Microsoft has also faced investigations in other jurisdictions over its business software. In September 2025, it agreed to unbundle Teams from its other software tools in the European market following an investigation by the European Commission.
