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Britain’s competition watchdog has announced plans to investigate whether Microsoft holds excessive market power in business software, in a move that could reshape licensing practices affecting hundreds of thousands of UK businesses and public sector organizations.
The Competition and Markets Authority (CMA) said it will launch a Strategic Market Status (SMS) investigation into Microsoft’s business software ecosystem starting in May, under the UK’s Digital Markets Competition Regime.
Scope of the Investigation
The probe will examine a wide range of Microsoft products, including Windows, Word, Excel, Teams, and Copilot. If Microsoft is designated with Strategic Market Status—a process that could take up to nine months—the CMA would gain the authority to impose behavioral remedies or pro-competition measures, subject to further legal procedures.
The regulator emphasized that the rapid integration of artificial intelligence into workplace tools has made this a critical moment for market oversight. Technologies such as Copilot, alongside enterprise AI tools from competitors, are increasingly embedded in business operations, raising concerns about competition and long-term productivity impacts.
Licensing Concerns and Cloud Market Power
A key factor behind the investigation is the CMA’s conclusion that Microsoft has made limited progress in addressing licensing concerns identified in a previous cloud market review completed in July 2025.
That review found that Microsoft and Amazon Web Services each account for up to 40% of UK cloud services spending, highlighting their significant influence in the market.
While both companies have taken steps to ease concerns—such as reducing cloud data transfer (egress) fees and improving interoperability—the CMA indicated that these measures may not be sufficient.
The firms have committed to removing egress fees for UK customers during a transition period of at least 180 days and to introducing new infrastructure connections between their data centers and competitors such as Google Cloud Platform. Microsoft stated that it plans to implement related contractual changes within two months.
However, the regulator noted that the real-world impact of these measures remains uncertain and that additional action may be necessary.
Global Regulatory Pressure Intensifies
The UK’s move aligns with a broader trend of increasing regulatory scrutiny of Microsoft’s business practices worldwide. Authorities in Brazil and Japan have also launched investigations into the company’s cloud and enterprise software operations, focusing on potential restrictions affecting customers and competitors.
This growing international focus underscores concerns about the competitive dynamics of digital infrastructure markets, particularly as AI becomes more deeply integrated into enterprise ecosystems.
Next Steps
The CMA confirmed that the formal scope of the SMS investigation, along with a call for public input, will be published when the probe begins in May. The outcome could have significant implications not only for Microsoft’s operations in the UK, but also for the broader structure of global enterprise software and cloud markets.
As regulators seek to balance innovation with fair competition, the case is likely to become a key test of how governments address market power in the era of AI-driven platforms.
