UK Regulator Proposes Strategic Market Status for Microsoft

The U.K.'s Competition and Markets Authority on Friday proposed designating Microsoft as having Strategic Market Status in its business software ecosystem. The designation could enable measures affecting how Microsoft bundles products such as Excel, Teams and its Copilot AI assistant. The CMA said the designation does not find or assume wrongdoing but provides entry into the U.K.'s digital markets competition regime.

The CMA noted that Microsoft has maintained a dominant position in the U.K.'s business software market for decades, initially through operating systems and productivity tools. Microsoft has since expanded into cybersecurity and database management. Microsoft's AI products and cloud services are creating further opportunities for businesses and customers across the country. The CMA said U.K. businesses and public sector organizations can benefit from buying several digital products and services from Microsoft. However, the CMA said those customers may face barriers when switching to other providers.

Microsoft's closely integrated products offer a more seamless experience than combining services from different companies. Microsoft's control over key APIs, technical interfaces and data flows can make competing providers less able to offer the same functionality. A Microsoft spokesperson told Reuters that Microsoft's products, including Copilot, are "open and interoperable, giving customers the ability to use them alongside competing services." Microsoft did not immediately respond to a separate request for comment.

The CMA said the regulator would examine whether customers can freely choose preferred AI tools and whether competing providers can compete effectively with Copilot. The CMA would also assess whether Microsoft restricts customer choice by bundling security products. The CMA would examine how Microsoft's licensing practices affect customers' cloud options. CMA Chief Executive Sarah Cardell said organizations should be able to choose suitable products, switch providers and combine services from different suppliers. The regulator invited comments on the proposed decision by November 13. The CMA will make a final decision by February 13, 2027.

The CMA launched the investigation into Microsoft's business software ecosystem in May as part of a broader effort to increase competition in cloud services and workplace software. Last year, the CMA designated Google's general search and advertising services as having Strategic Market Status after confirming that Google met the legal criteria. The CMA announced in March that the regulator was consulting stakeholders about whether Amazon Web Services and Microsoft were fulfilling commitments to improve cloud customer choice. The consultation also sought to determine whether further action was necessary.

Microsoft shares closed 1.93% lower at $529.05 on Friday. Microsoft shares fell 0.42% in after-hours trading. Microsoft shares have risen 9.39% year-to-date, according to Benzinga Pro.