Britain’s competition watchdog has proposed designating Microsoft with “strategic market status” in business software, a move that could pave the way for interventions in how the US tech giant bundles products such as Excel, Teams and its Copilot AI assistant. The Competition and Markets Authority (CMA) announced the proposal on Friday, Oct. 16, escalating a regulatory battle with one of the world’s most powerful technology companies.
The CMA launched an investigation in May into whether Microsoft’s position in software used by around 20 million people a month in Britain was uncompetitive. On Friday, the regulator said it had found that the tech giant held a strong position in personal computer operating systems and productivity, security, server and database management software — a position reinforced by the barriers customers face when trying to switch providers.
If the proposal goes through, the Redmond company would become the third company subject to Britain’s new digital market powers. Google received strategic market status in online search and in mobile platforms, and Apple received strategic market status in mobile platforms, all in October 2025.
Why Microsoft Is Under Regulatory Scrutiny
The CMA said it would examine several areas of concern. Investigators will assess whether customers can freely choose AI tools and whether rivals can genuinely compete with Copilot, Microsoft’s AI assistant. They will also look at whether Microsoft’s bundling of security products limits choice, and how the company’s licensing practices affect customers’ cloud deployment options.
CMA Chief Executive Sarah Cardell said business software and cloud services underpinned workplaces across Britain, from small firms to vital public services. “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 said. “We want to ensure businesses have the freedom to choose how they use Microsoft’s products alongside alternatives.”
The regulator emphasized that strategic market status does not imply wrongdoing, but instead acknowledges that a company has substantial, entrenched power in a particular market. Should the CMA formally designate Microsoft, it would be able to consider “targeted and proportionate interventions” to support competition.
Microsoft Responds to the UK Proposal
A spokesperson said the company did not share the CMA’s view. “All our products — including Copilot — are open and interoperable, giving customers the ability to use them alongside competing services,” the spokesperson said.
The designation process is not instant. The regulator will invite views on the proposed designation and will then make a final decision by February, giving the company, competitors and customers a window to weigh in on whether the extra oversight is warranted.
The case is part of a broader pattern of aggressive UK tech regulation. In June this year, the CMA imposed new conduct requirements on Google’s search services, including allowing publishers to stop their content being used to power the US tech major’s AI features, and ordered greater transparency on how search rankings work.
What the Microsoft Designation Could Change
A formal designation would hand the CMA significant new powers. The regulator could impose conduct requirements on how the company bundles products, require greater interoperability with rival services, and scrutinize licensing terms that make it expensive for customers to move workloads to competing clouds. Microsoft would have the chance to respond during the consultation before the CMA makes its final decision by February. Enterprise software is rarely a headline-grabber, but in Britain it is deeply embedded: government departments, the NHS and FTSE-listed companies all run heavily on the company’s stack. How this fight resolves could reshape how business software is bought and sold across the country.
For enterprise customers, the practical stakes are significant. Bundled pricing for productivity suites, cloud contracts and AI add-ons shape IT budgets at thousands of British organizations, and any intervention could change how the company is allowed to package its software in one of its most important markets. Whether the proposal becomes a designation — and what interventions follow — will be one of the defining tech-policy stories of the year ahead.