UK regulator moves to put Microsoft under special tech rules

The UK's competition watchdog wants new powers over the software most offices run on. The Competition and Markets Authority (CMA) has proposed designating Microsoft with strategic market status (SMS) for its business software ecosystem, and is now consulting before a final decision, the regulator announced.

What the CMA looked at

The investigation covered five areas: PC operating systems, productivity suites, security software, server operating systems and relational databases. In practice that means Windows, Word, Excel, Outlook, PowerPoint, Teams, increasingly Copilot, plus Defender, Windows Server and Microsoft's database software. The CMA says these tools are used by more than a million UK businesses and public bodies, with around 20 million monthly users.

Its provisional findings are that Microsoft has a strong position in each of the five areas. The regulator says that strength comes from the barriers customers face when switching, and that commercial practices, such as bundles and enterprise-wide discounts, together with integration advantages, add hurdles rival developers cannot easily overcome.

What could change

Alongside the proposal, the CMA published a roadmap of areas it would examine if Microsoft is designated:

• AI choice: whether customers can freely pick the AI tools they want, and whether rival AI providers get a level playing field against Copilot.
• Security bundling: whether the way Microsoft bundles and integrates its security products limits choice.
• Cloud licensing: whether customers can choose which cloud runs their software licences, and how Microsoft's licensing affects that choice.

The CMA stresses that SMS status does not find or assume wrongdoing. It is the gateway to the UK's digital markets regime under the Digital Markets, Competition and Consumers Act 2024, and would allow targeted measures such as conduct requirements.

Cloud update too

In the same announcement, the CMA said Microsoft and AWS have already made "material" changes to support choice in cloud, including connecting their data centres with rivals starting with Google, removing data transfer fees for customers who switch provider, and AI tools that automate switching steps. It wants more, especially on identity and access management across clouds, and plans another update in spring 2027.

Microsoft is also building out its own AI stack, from its Maia 300 inference chip to its MAI-Base-2 model. Regulators elsewhere are busy too: China has just drafted export controls on AI technology.