CMA Uses Microsoft’s Office Stack to Reach Cloud Licences

Britain’s Competition and Markets Authority proposed on 16 October 2026 to designate Microsoft with strategic market status for its business software ecosystem. The suite reaches over a million UK organisations and around 20 million monthly users.

The tag would let the CMA write rules on cloud licensing and Copilot, the fights its 2025 cloud probe closed without a formal designation.

Microsoft Faces a UK Tag on Its Office Stack

The CMA proposed Microsoft strategic market status after an investigation opened on 14 May 2026. The draft covers five digital activities: personal computer operating systems, productivity software suites, security software, server operating systems and relational database management systems.

In the productivity suite that means Word, Excel, Outlook, PowerPoint and Teams, with Copilot now in the mix. On the systems side it means Windows, Windows Server, SQL Server and Microsoft’s own security products. The watchdog says Microsoft holds a strong position in each of those five areas, and that switching costs plus bundling and tight technical integration weaken rival software firms.

Sarah Cardell, the CMA’s chief executive, put the aim in workplace terms rather than market-share charts.

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. We want to ensure businesses have the freedom to choose how they use Microsoft’s products alongside alternatives.

Sarah Cardell, Chief Executive, Competition and Markets Authority

The findings are provisional. Comments are due by 5pm on 13 November 2026, and the statutory deadline for a decision notice is 13 February 2027. A designation would not, by itself, find that Microsoft broke any law.

Why the Cloud Probe Did Not Finish the Job

The CMA’s 2025 cloud services market investigation found that Amazon and Microsoft hold positions of significant market power, and that Microsoft’s licensing of key business software on the cloud limited customer choice. The inquiry group had floated using the new digital markets law to consider strategic market status for both firms in cloud. That is not what the board did.

On 31 March 2026 the CMA instead said it would open an SMS investigation into Microsoft’s business software, because a designation there would let it act on cloud software licensing and on AI inside everyday office tools. Cloud itself was left on a lighter track: engagement with Microsoft and Amazon Web Services, subject to review, with a full cloud SMS case kept in reserve.

Cardell was explicit at that March announcement. An SMS tag on the software suite, she said, would enable the CMA to tackle remaining concerns around Microsoft’s licensing practices in cloud, and to keep a level field as AI is built into workplace tools. The October roadmap repeats the same unfinished point. Evidence received since the July 2025 cloud report, it says, shows Microsoft has not altered those licensing practices.

The softer cloud track has produced some movement. Microsoft and AWS have connected their data centres with rivals, beginning with Google; removed data transfer fees for customers changing providers and cut those fees where firms use more than one cloud; opened a route for customers and competitors to request greater interoperability; and rolled out AI tools to automate technical steps in a switch. The CMA still wants work on identity and access management across clouds, and on architectures that can move without extra hurdles. A further cloud update is due in Spring 2027. The possibility of a full SMS investigation in cloud remains open.

So the live legal fight over Windows Server and SQL Server running on someone else’s cloud is now sitting inside a Windows-and-Office designation, not a cloud one. That is a slower path than a narrow licensing order, and it is the path the CMA chose.

Five Markets Inside One Designation

The CMA is not proposing five separate tags. It treats the products as one business software ecosystem, a single digital activity, while also saying Microsoft meets the legal tests in each part on its own. That width is the design, and it is what later conduct rules would have to sit on.

THE FIVE ACTIVITIES IN THE PROPOSED TAG

Microsoft has been the main provider of this software in Britain for decades, the roadmap says, centred on Windows PCs and servers and the Office applications, with databases and identity and security tools around them. Commercial practices and integration advantages, the October press notice adds, can push customers toward Microsoft’s own products in ways other developers cannot easily match.

Jigsaw Research was hired in June 2026 to interview UK customers about how they buy, what else they could use, and whether they can switch. Those interviews feed the provisional view. They are also the material critics now read in the opposite direction, as evidence that firms stay because the products work together and the bundle looks cheap, not because they are trapped.

The Roadmap Puts Copilot Next to Cloud Licences

If the designation is confirmed, the CMA would still have to consult again before it imposed any conduct requirement or pro-competition intervention. The 16 October roadmap is not a remedies list. It is a shortlist of where the staff want more evidence in the first half of any designation period.

FOUR AREAS FOR FURTHER WORK

• Cloud licensing: Whether customers can choose which cloud runs the software they already pay for, and how Microsoft’s licence terms affect that choice, the concern left standing after the July 2025 cloud report.
• AI in productivity software: Whether rival AI tools can plug into the suite, be found inside it, and compete with Copilot on a level field, in a market the CMA itself calls fast-moving.
• Teams and other collaboration apps: Whether bundling and weak connections to rival chat and meeting tools still hurt choice in Britain, after Brussels took commitments that do not formally apply in the UK.
• Security software: Whether Microsoft’s own security products get deeper hooks into Windows and Office than third-party tools, and whether bundling shuts those rivals out.

On Teams, the European Commission in 2025 accepted European Commission Teams commitments that combined unbundling, interoperability and transparency. The CMA’s roadmap notes those commitments do not currently apply formally in the UK, and says it will look at how they have worked in Europe before deciding whether Britain needs its own step.

Copilot is the newer edge of the same problem. The CMA says UK organisations gain most if they can mix AI services from a broad set of suppliers, and that for government and other critical bodies the ability to switch and combine tools is also a resilience issue. Microsoft’s reply is that Copilot is already open. The roadmap still puts rival access, discovery and integration on the work plan, because the assistant now lives inside Word, Excel, Outlook, PowerPoint and Teams, the same suite the CMA wants to tag.

Pressure From Google, Cloud Rivals and Browser Makers

Microsoft said it does not share the CMA’s views in the proposed decision. All of its products, including Copilot, are open and interoperable, a spokesperson said, so customers can use them beside competing services and pick what works at attractive prices. The company said it will keep engaging so UK customers continue to see strong competition.

Cloud rivals have been waiting for the licensing half of this case since the cloud probe. The Open Cloud Coalition, which counts Google as a member, backed a fast, hard use of the new powers.

Microsoft’s restrictive software licensing practices distort competition in the cloud, harm choice, and increase costs. This once-in-a-generation opportunity to end these practices can strengthen competition and lower customer costs, if the CMA acts quickly and decisively.

Open Cloud Coalition statement

The Browser Choice Alliance, whose members include Google Chrome, Opera, Vivaldi, Wavebox and Waterfox-maker BrowserWorks, welcomed the proposed tag for a different reason. Its June 2026 submission to the CMA’s invitation to comment argued that Windows and the productivity suite are used to push Edge, including by resetting defaults and ignoring a user’s chosen browser inside must-have Office apps. After the October proposal it said members have long seen Microsoft use that market power to steer people to Edge even when they are trying to use something else.

The sharpest public objection to the CMA’s own design came from Matthew Lesh, a public policy fellow at the Institute of Economic Affairs. He argued that the watchdog rolled five markets into one ecosystem, put Copilot in scope in a workplace AI fight that is still young, and delayed the cloud-licensing work the 2025 probe actually identified until at least February 2027, with more consultations after that. His follow-up was that ministers had promised a targeted, proportionate and fast regime, and that this test is none of those three.

That objection has force on timing even if you accept the CMA’s theory of harm. An SMS label would not, on the day it is issued, let a buyer move a Windows Server workload onto AWS or Google Cloud, or swap Copilot for another assistant inside Excel. It would only let the CMA start drafting the rules that might. Firms buying software this autumn still have to ask, in the contract, whether a licence can move and what a transition would cost.

What Strategic Market Status Would Change

Strategic market status is the gateway in the Digital Markets, Competition and Consumers Act 2024, which came into force on 1 January 2025. It is a lower bar than a classic dominance finding. The CMA has to show substantial and entrenched market power and a position of strategic significance in a digital activity linked to the UK. If those tests are met, it may then impose conduct requirements or pro-competition interventions, each under its own legal process.

WHAT THE TAG WOULD AND WOULD NOT DO

• The legal test: Substantial and entrenched market power plus strategic significance, applied here to one business software ecosystem and, in the CMA’s provisional view, to each of the five activities inside it.
• No finding of guilt: The CMA repeats that a designation does not assume wrongdoing and does not, by itself, change how products are sold.
• The follow-on tools: Bespoke conduct requirements and pro-competition interventions, designed activity by activity, only after further evidence and further consultation.
• The companies already in: Apple and Google were designated on 22 October 2025 for their mobile platforms, covering operating systems, app stores and mobile browsers. Microsoft would be the third company under the regime.

Apple’s and Google’s mobile designations last five years. The Microsoft case is still a proposal, so no designation period has been set. The March 2026 notes said an SMS investigation can take up to nine months; the 14 May 2026 start date and the 13 February 2027 notice deadline sit on that clock.

Decision makers for this investigation sit on a sub-committee of the CMA’s Digital Markets Board Committee, including Cardell and Will Hayter, the executive director for digital markets. Microsoft will have a chance to make oral representations on the proposed decision after the written consultation closes.

The 13 February Deadline and the Months After

The live process is a consultation, not a set of new rules. Microsoft has told the CMA it will not use confidentiality clauses to stop counterparties responding, and any non-disclosure agreement with the company should not block a submission. Responses go through the consultation portal or to business.software.sms@cma.gov.uk. Non-confidential versions are due to be published in November 2026.

THE PATH FROM THE CLOUD PROBE TO A DECISION NOTICE

1. July 2025: The cloud market investigation final report finds Microsoft’s licensing of certain business software limits choice and reduces competition in cloud.
2. 31 March 2026: The CMA board decides to open an SMS investigation into Microsoft’s business software and to keep working with Microsoft and AWS on cloud without a cloud designation.
3. 14 May 2026: The SMS investigation opens, with an invitation to comment that closed on 4 June 2026.
4. 16 October 2026: The CMA publishes its proposed designation, the intervention roadmap and a consultation.
5. 13 November 2026: Consultation closes at 5pm.
6. 13 February 2027: Statutory deadline for any SMS decision notice.
7. Spring 2027: Further public update on the AWS and Microsoft cloud engagement, with a full cloud SMS investigation still possible.

Even a yes on 13 February 2027 would only open the next file. Cloud licences, Copilot, Teams and security would still need evidence, draft rules and another round of comment before anything changed in a contract. The CMA has given itself a wide net so it can reach those fights. It has also given Microsoft, and everyone else, a long wait before the net closes.