The CMA is the first of its peers to materially examine the competitive impact of Microsoft's dominance in business software by grouping its products together
Microsoft has been found to have substantial and entrenched market power in the business software ecosystem
On 16 October 2026, the UK's Competition and Markets Authority (CMA) published its proposed decision to designate Microsoft as having strategic market status (SMS) in its business software ecosystem following a six-month-long investigation under the Digital Markets, Competition and Consumers Act (DMCCA) 2024. The proposed decision states that Microsoft has substantial and entrenched market power (SEMP) due to the “network effects” of its commercial bundling of services and the limits on customers’ ability to switch. The CMA considers that Microsoft’s strategic position in the business software market is unlikely to be eliminated by technology trends – and recognises that AI adoption may actually strengthen Microsoft’s position as a result of its Copilot AI tool’s integration into its services. Designating Microsoft as having SMS would enable the CMA to use targeted interventions to ensure the business software ecosystem is competitive. However, the regulator is yet to use the full extent of its intervening powers under the DMCCA, having only imposed conduct requirements (CRs) on Apple and Google, while avoiding the use of stronger, pro-competition interventions (PCIs). Stakeholders have until 13 November 2026 to respond to the consultation on the proposed designation, after which the CMA will have until 13 February 2027 to finalise its decision.
Interoperability, bundling, network effects and customer-side frictions characterise the barriers alternative providers face when trying to compete with Microsoft
The CMA has identified four main categories of barriers to competition which apply across Microsoft’s business software ecosystem:
Technical integration and interoperability between digital activities – Microsoft’s control of important technical interfaces and data flows can limit competitors’ abilities to offer equivalent services;
Commercial bundling – The range of products included in Microsoft’s bundles means that customers perceive individual products as being available at little or no additional cost, making them less likely to adopt products from competitors;
Network effects – Widespread adoption of Microsoft products creates network effects that make it easier for businesses to interact with their stakeholders, making switching less attractive and more costly; and
Customer-side frictions – Barriers arise from application, data, workflow and technical dependencies that become embedded within customer environments over time.
Google is the primary challenger in the business software ecosystem, but its market position still pales in comparison to Microsoft’s
Although the CMA’s SMS designation is focused on Microsoft’s entire business software ecosystem, it also examined whether Microsoft has SEMP in each of the five individual digital activities making up that ecosystem. The CMA’s investigation focused on Microsoft’s PC operating system (PC OS – e.g. Windows 11), Productivity Software Suite (PSS – e.g. Office 365 and Copilot applications), server operating system (Server OS – e.g. Windows Server), relational database management system (RDBMS – e.g. SQL Server) and its security software – e.g. Purview, Security Copilot and Agent 365. The CMA found that Microsoft has SEMP in each of these digital activities, the grouping of which unsurprisingly resulted in it meeting the conditions to be designated as having SMS – although, the CMA also noted that SMS conditions would have been met in each individual activity too, highlighting just how strong Microsoft’s position in these markets is. It references that Google is the only competitor to Microsoft that offers products in the same group of digital activities. However, as the CMA explains, Google has a much smaller position than Microsoft in each activity and generates substantially lower revenues from its Google Workspace bundles than Microsoft does from its Office 365 bundles.
The CMA and the EC have taken the most significant action against Microsoft internationally
Internationally, a number of other regulators have taken some action against Microsoft in similar markets, but only the EC has gone as far as the CMA in proposing to subject it to potentially significant competition interventions, albeit solely for its cloud services (see Table). In June 2026, the EC’s investigation into Microsoft’s cloud services under the Digital Markets Act (DMA) led it to preliminarily designate Microsoft Azure as a “gatekeeper” (SMS-equivalent), with a final decision expected in the coming months. The Bundeskartellamt in Germany was the first to inquire about the competitive impacts of Microsoft’s products as a group in March 2023, where it highlighted the effects of commercial bundling and the linkages between different products. It found that Microsoft was of “paramount significance” for competition because of its group of products’ “omnipresence” in the public and private sectors. However, the Bundeskartellamt is yet to take any further action, making the CMA’s move to specify five of Microsoft’s products and subject them to potential interventions unique internationally. Elsewhere, in Japan and Brazil, the Japan Fair Trade Commission (JFTC) and the Administrative Council for Economic Defence (CADE) have more recently started to investigate Microsoft in March and January 2026 respectively. CADE’s investigation focuses on Microsoft’s cloud offering and its software licensing, which only it, the CMA and Bundeskartellamt’s investigations have done so far, with the EC and JFTC only focusing on the cloud-side. However, it is worth noting that the EC previously designated Microsoft’s Windows PC OS as a “gatekeeper” under the DMA too, but has not gone as far as the CMA in examining all of its other services.
