CMA takes aim at Microsoft: what the strategic market status move means for UK businesses

I've lost count of the number of British IT managers who've said it to me: "We're a Microsoft shop — what's the alternative?" This Friday, Britain's competition watchdog gave that question its first serious answer.

The Competition and Markets Authority has proposed designating Microsoft with "strategic market status" in business software — the new digital powers created by the Digital Markets, Competition and Consumers Act 2024. After consultation, Microsoft could become only the third company caught in the net, following Google and Apple in October 2025.

This is the CMA's first move in an investigation it opened on 14 May this year into how Microsoft sells business software in Britain. And the numbers explain why it matters. More than a million UK businesses and public sector organisations run on Microsoft's stack, with around 20 million monthly users — from Whitehall departments and NHS trusts to your local high-street solicitor.

What is strategic market status — and why should UK firms care?

Don't be fooled by the dry label. Strategic market status doesn't mean Microsoft is being fined, and it doesn't assume any wrongdoing — the CMA says so explicitly. What it does is give the watchdog the power to write bespoke rules for how Microsoft operates: targeted "conduct requirements" or pro-competition interventions, instead of waiting for a complaint and dragging everyone through years of enforcement.

The CMA's provisional finding: Microsoft holds a strong position across five digital activities — PC operating systems, productivity software, security, server operating systems and databases — built on the sheer difficulty customers face when trying to switch away. Commercial practices and integration advantages keep pulling buyers deeper into Microsoft's world, in ways rivals "cannot easily overcome".

Anyone who has tried to unpick a Microsoft 365 estate mid-contract will recognise that description. It's not that the software is bad — it's that leaving costs so much time, money and retraining that most firms never seriously try.

Teams, Copilot and the cloud: where the CMA will look next

Alongside the proposed designation, the CMA published an indicative roadmap of where it would probe further. The list reads like a greatest-hits of every grievance I've heard from British businesses over the past three years.

First, AI. The watchdog wants to know whether customers can freely choose AI tools beyond Microsoft's Copilot, and whether rival AI providers get a fair crack at competing with it. Computer Weekly's Antony Adshead notes the CMA is framing this as an AI inflection point — the market is still open, but risks closing if Microsoft's ecosystem doesn't play nicely with rivals.

Then Teams and communications software, whether security-product bundling limits choice, and cloud licensing — whether customers genuinely choose which cloud runs their software, or whether Microsoft's licensing quietly punishes those who pick a rival.

There's wider context too. The CMA has been engaging Microsoft and Amazon on cloud services, and on Friday reported "material steps" from both: data centres connecting with rivals starting with Google, data transfer fees scrapped for switchers, and AI tools to automate the technical slog of moving clouds.

What Microsoft and the CMA say

CMA chief executive Sarah Cardell didn't mince words. "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, adding that business software "underpins workplaces across the UK, from small firms to vital public services".

Microsoft pushed back, as you'd expect. A spokesperson said the company did not share the CMA's views in the proposed decision, insisting: "All our products — including Copilot — are open and interoperable, giving customers the ability to use them alongside competing services."

My reading? Both sides have a point — which is exactly why the consultation matters. Microsoft has confirmed it won't use NDA confidentiality clauses to stop anyone responding; views go to the CMA by 13 November 2026, with a final decision by the February 2027 statutory deadline. That's a genuinely open door.

And Microsoft is fighting on more than one front. Separately, the CMA is investigating whether the company misled customers into paying more for subscriptions after folding its Copilot AI product into the package, according to the Business Times. Three years on from the bruising $69 billion Activision Blizzard takeover battle, relations between Redmond and the CMA clearly haven't thawed.

So where does this leave the million-plus British organisations in Microsoft's orbit? For now, nowhere different — a proposal, not a verdict. But the direction of travel is unmistakable. Britain's new digital-markets regime has already bitten Google: June's conduct requirements let publishers block their content from AI training and demand search-ranking transparency. If Microsoft is designated in February, bespoke rules on bundling, interoperability and licensing will follow — and eventually, lower prices and real choice for UK businesses.

The surrender of "what's the alternative?" may finally start sounding like a question with an answer.

Sources

• GOV.UK — CMA press release: "CMA takes first steps to ensure choice in business software" (16 Oct 2026)
• GOV.UK — CMA case page: Microsoft's business software ecosystem (proposed decision + evidence)
• Reuters — "UK competition regulator targets Microsoft's business software grip" (16 Oct 2026)
• Computer Weekly — "CMA to decide Microsoft strategic market status by February 2027" (16 Oct 2026)
• Business Times — "UK watchdog proposes tougher scrutiny of Microsoft software" (16 Oct 2026)

No dedicated YouTube report on this announcement could be verified from a reputable outlet at the time of writing, so none is embedded here. The CMA's full proposed decision, supporting evidence and consultation details are in the GOV.UK case page linked above.