CMA Proposes Designating Microsoft With Strategic Market Status in UK Business Software

The UK's Competition and Markets Authority (CMA) has provisionally found that Microsoft meets the legal threshold for strategic market status (SMS) in its business software ecosystem, a designation that would give the regulator new powers to impose conduct requirements on the company. The CMA is proposing the designation and will consult before making a final decision by the statutory deadline of 13 February 2027, according to the CMA's announcement.

What the CMA Investigated and Found

The regulator launched its investigation on 14 May 2026 and examined 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 has a strong position across each of these five areas, according to its proposed decision document.

The CMA attributes Microsoft's strength to barriers customers face when trying to switch providers, which it says limits choice and weakens competitive pressure from rival software developers. The regulator also points to commercial practices and integration advantages that it says incentivise customers to adopt Microsoft products, creating barriers that other developers cannot easily overcome.

Products and Practices Under the Microscope

The business software covered by the provisional finding includes Word, Excel, Outlook, PowerPoint, Teams and, increasingly, Copilot, alongside Microsoft's security, server and operating system products. The CMA says this software is used by over a million businesses and public sector organisations across the UK, with around 20 million monthly users.

Alongside the provisional designation, the CMA published an indicative roadmap identifying three specific areas for further evidence-gathering and possible intervention: whether rival AI providers have a level playing field to compete with Copilot; whether Microsoft's bundling and integration of its security products limits customer choice; and whether Microsoft's cloud licensing practices restrict customers' effective choice over which cloud they deploy their software licences on.

The CMA frames this scrutiny against a backdrop of rapid sector change, noting increased AI functionality and a shift towards agentic AI in workplace tools, and argues that for government and critical organisations, the ability to choose, switch and combine digital services without over-dependence on a single provider matters for resilience and strategic autonomy.

What Powers Could Follow a Final Designation

The CMA is explicit that SMS designation does not assume wrongdoing. If Microsoft is designated, the CMA says it could consider targeted and proportionate interventions to support competition, subject to meeting the relevant legal tests, which could include conduct requirements or pro-competition interventions. The regulator has not specified at this stage which, if any, of these interventions it would pursue.

CMA Chief Executive Sarah Cardell said the evidence shows Microsoft has a long-standing and significant presence in the UK's business software market, and that 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 proceeds with designation, its focus would be on promoting competition and giving businesses greater freedom to choose and combine products in business software.

Consultation Process and Confidentiality

Interested parties can submit responses through the CMA's consultation portal or by email by 5pm on 13 November 2026, ahead of the CMA's final decision due by 13 February 2027. The CMA states that any non-disclosure agreement a party may have in place with Microsoft should not prevent them from responding to the consultation, and says Microsoft has confirmed it will not use any confidentiality provision with a party to prevent them from responding.

Cloud Services Scrutiny Running in Parallel

Separately, the CMA published an update on its ongoing monitoring of cloud services involving Amazon Web Services and Microsoft. The regulator says this monitoring has driven material developments from both companies, including connecting their data centres with rivals beginning with Google, removing data transfer fees for customers changing cloud providers (and reducing fees for those using more than one provider), introducing a new mechanism for competitors and customers to request greater interoperability, and rolling out AI tools to automate technical switching steps.

The CMA says more can be done to address remaining barriers to cloud switching and multi-cloud use, and has agreed with both companies to focus on improving cross-cloud identity and access management and ensuring portable cloud architectures can be deployed and migrated without unnecessary barriers. The regulator is keeping open the possibility of launching a full SMS investigation into cloud services, with a further update expected in Spring 2027.

Bottom Line

This is a provisional finding, not a final decision: the CMA is proposing designation and has opened a consultation running to 5pm on 13 November 2026 before it rules by the statutory deadline of 13 February 2027. The scope as set out, spanning personal computer operating systems, productivity suites, security software, server operating systems and relational database management systems, together with the roadmap's focus on Copilot, security bundling and cloud licensing, indicates where the regulator's evidence-gathering is likely to concentrate next (interpretation based on the CMA's published roadmap). Whether any conduct requirements or pro-competition interventions ultimately follow will depend on the consultation and the CMA's assessment against the relevant legal tests it must meet.