Microsoft is facing a sweeping new challenge in the United Kingdom as the country’s competition regulator launches a broad Microsoft business software UK antitrust probe. The Competition and Markets Authority (CMA) is investigating whether the tech giant has used its dominant position in productivity and operating systems to stifle competition in the cloud, cybersecurity and artificial intelligence markets.
The investigation centers on “Strategic Market Status” (SMS), a designation under the UK’s new digital markets regime that allows the regulator to impose specific conduct requirements on firms with substantial and entrenched market power. This move signals a shift in how the UK intends to police the enterprise technology stack, moving beyond individual product disputes to an ecosystem-level review of how Microsoft integrates its vast array of services.
According to the CMA, the probe will determine if Microsoft holds a “position of strategic significance” that it has leveraged to limit customer choice or weaken the competitive pressure from rivals. With more than 15 million commercial users across its UK ecosystem, the stakes for Microsoft are high, as a designation could force the company to change how it bundles software or manages interoperability between its tools and those of its competitors.
The scope of the Strategic Market Status probe
Unlike previous investigations that targeted specific behaviors—such as the bundling of Teams with Office—this case is significantly wider in scope. The CMA is examining a comprehensive suite of business tools, ranging from the foundational operating system to the newest AI overlays.
The regulator is specifically looking at product bundling, default settings that may discourage switching, and interoperability limits that prevent UK organizations from combining Microsoft software with third-party providers. Sarah Cardell, chief executive of the Competition and Markets Authority, stated that the goal is to ensure UK organizations benefit from “choice, innovation and competitive prices.”
| Category | Software/Services Under Review |
|---|---|
| Productivity | Word, Excel, Teams |
| Operating Systems | Windows (PC and Server) |
| AI Integration | Copilot |
| Infrastructure | Database management and security software |
This is the fourth SMS investigation launched since the UK’s digital markets competition regime came into force in January 2025, following similar probes into Google’s search and mobile platforms and Apple’s mobile ecosystem.
The AI lock-in dilemma
A central pillar of the investigation is the rapid integration of artificial intelligence. The CMA is examining how AI competitors are able to integrate with Microsoft’s business software and whether customers can effectively mix AI tools from rival suppliers within a Microsoft environment.
The regulator is particularly focused on the shift toward “agentic AI”—tools that can act on behalf of a user to complete complex tasks—which Microsoft has been aggressively pushing through Copilot across its Microsoft 365 tiers. The concern is that as AI becomes more embedded in the workflow, the “lock-in” effect increases, making it nearly impossible for a company to switch vendors without losing critical operational intelligence.
Dario Maisto, a senior analyst at Forrester, notes that while AI hasn’t yet fully rewritten the lock-in conversation, it is moving in that direction. “Copilots have the potential to make employees and organizations more dependent on existing vendors, as any other feature embedded in the suites,” Maisto said. He added that for Chief Information Officers (CIOs), diversifying the technology stack is often as difficult as finding enterprise-grade alternatives to the core Microsoft products themselves.
Legacy cloud battles and licensing
The current probe also serves as a bridge to unresolved tensions regarding cloud computing. An SMS finding would allow the CMA to address concerns from a previous cloud market investigation, which suggested that Microsoft’s software licensing practices were reducing competition.
Amazon Web Services (AWS) previously informed the regulator that licensing changes made by Microsoft in 2019 and 2022 created unnecessary hurdles for customers trying to run Microsoft products on rival clouds, such as Google Cloud, AWS, and Alibaba. By making it more expensive or technically difficult to use Microsoft software outside of Azure, the regulator suspects Microsoft may be unfairly steering customers toward its own cloud infrastructure.
This investigation runs parallel to ongoing discussions between the CMA, AWS, and Microsoft regarding product interoperability and cloud egress fees—the costs associated with moving data out of a cloud provider’s ecosystem.
A broader push for tech sovereignty
The UK’s actions mirror a growing global trend toward “tech sovereignty,” particularly in Europe. As organizations attempt to balance multi-cloud strategies with the need for stability, they often find themselves consolidating around a few strategic vendors, paradoxically increasing their dependence on US-based platforms.
Maisto pointed to emerging discussions within the European Commission regarding the restriction of US cloud platforms for processing sensitive government data. The Commission is expected to present a “Tech Sovereignty Package” on May 27 to define specific sectors that must be hosted on European cloud capacity.
However, analysts suggest that regulatory intervention may not be enough to reverse market concentration. Maisto noted that while interoperability is a major talking point, “what works on paper in a policy may not work in reality,” and he does not foresee a massive decrease in market concentration solely due to these probes.
The CMA has clarified that the SMS status does not automatically assume wrongdoing. If Microsoft is eventually designated as having SMS, the regulator can then impose conduct requirements or pro-competition interventions based on specific legal tests.
The next major milestone in this case is the designation decision, which is due by February 2027. Until then, the CMA will continue its assessment of Microsoft’s market power and its impact on the UK’s enterprise technology landscape.
Do you think AI integration is creating an unfair lock-in for businesses, or is it simply a natural evolution of productivity tools? Share your thoughts in the comments.
Disclaimer: This article discusses ongoing antitrust investigations and regulatory proceedings. It is provided for informational purposes and does not constitute legal or financial advice.
