The UK’s Competition and Markets Authority (CMA) will open a strategic market status (SMS) investigation into Microsoft’s business software ecosystem in May, targeting concerns that the company’s licensing practices may limit competition in cloud services.

Hundreds of thousands of UK businesses and public sector organisations use Microsoft software, including Windows, Word, Excel, Teams and AI platform Copilot, the regulator noted.

CMA chief executive Sarah Cardell said an SMS designation would allow the regulator to address remaining concerns around Microsoft’s licensing and ensure fair competition as AI becomes embedded in business tools. “An SMS designation would enable us to tackle remaining concerns around Microsoft’s licensing practices in cloud and would also enable us to ensure a level playing field as AI is rapidly embedded into everyday business software tools,” she said.

Following a three-year review of the UK cloud market, the CMA concluded that neither Microsoft Azure nor Amazon Web Services (AWS) should be granted SMS status, which would have imposed obligations on operating practices. Both companies have committed to changes on cloud egress fees and product interoperability designed to reduce the cost and complexity of switching between providers, the regulator stated.

Microsoft president Brad Smith said the company would implement the CMA’s recommended changes promptly. “We recognise that the CMA will continue to review and assess additional issues relating to our products and services, including in the business software market,” he said.

AWS confirmed its commitment to customer choice and multi-cloud adoption through a new UK addendum, formalising rights around data portability and switching processes, said a spokesperson for the company in a blog post.

The CMA will review progress on the agreed changes in six months and continue structured engagement with both providers to ensure tangible benefits for UK businesses and public sector organisations. The regulator cited the rapid emergence of generative and agentic AI tools as a key factor in acting now, warning that market openness could be restricted if Microsoft’s ecosystem does not support third-party interoperability.

Microsoft and AWS each hold roughly 40 per cent of the UK infrastructure-as-a-service market, with Google Cloud trailing at around 10 per cent, the CMA reported. The regulator said the software licensing issues were unique to Microsoft, explaining why the new SMS investigation focuses solely on its business software rather than cloud infrastructure more broadly.

The move aligns with wider European scrutiny, as the European Commission is considering whether AWS and Microsoft should be designated under the EU’s Digital Markets Act, while other tech companies such as Google and Apple have already received SMS designations for mobile platforms.

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