The United Kingdom’s Competition and Markets Authority (CMA) has launched a formal antitrust investigation into Microsoft over concerns that the tech giant’s software bundling, cloud licensing practices, and integration of artificial intelligence may be restricting competition in the business software market.
The probe marks one of the most significant regulatory examinations of Microsoft’s enterprise ecosystem in the UK and comes amid growing global scrutiny of dominant technology firms and their expanding influence in cloud computing and AI services.
In a statement announcing the investigation, the CMA said it would examine whether Microsoft’s business practices “limit competition and innovation” by making it harder for rivals to compete fairly in workplace software, cloud infrastructure, and AI-enabled services.
The inquiry will focus heavily on Microsoft’s bundling of workplace applications such as Microsoft 365 and Office 365, with regulators assessing whether the company’s integrated ecosystem creates customer “lock-in” and discourages businesses from switching to competing platforms.
“Businesses should be able to choose the software and cloud services that best meet their needs without facing artificial barriers,” a CMA spokesperson said. “We are investigating whether Microsoft’s practices are reducing competitive choice and limiting innovation in these important digital markets.”
The watchdog is also reviewing Microsoft’s cloud licensing policies, particularly allegations that they are more expensive or technically restrictive for running Microsoft enterprise software, including Windows Server, on rival cloud providers rather than on Microsoft Azure.
Industry competitors have long argued that Microsoft’s licensing terms give Azure an unfair competitive advantage in the rapidly growing cloud infrastructure market.
The CMA said it would assess whether those licensing arrangements create interoperability challenges that disadvantage rival cloud providers and reduce flexibility for enterprise customers.
The integration of artificial intelligence has emerged as another central issue in the investigation. Regulators will examine whether Microsoft’s dominant software ecosystem unfairly promotes its own AI tools, including Copilot, through default settings and pre-installed integrations that may hinder competing AI developers.
“AI is rapidly becoming embedded in core business software products, and regulators are increasingly concerned about how dominant firms may use that integration to reinforce existing market power,” said Daniel Whitmore, a London-based competition analyst. “The CMA appears determined to address those risks before the market becomes even more concentrated.”
The investigation could ultimately lead to Microsoft being designated with “Strategic Market Status” (SMS) under the UK’s digital competition regime. Such a designation would subject the company to stricter regulatory obligations and potentially legally binding changes to its business practices if anticompetitive conduct is established.
Under the UK framework, companies classified with SMS status can face targeted interventions designed to improve competition, interoperability, and consumer choice. The CMA said the initial phase of the investigation is expected to conclude within nine months, with final findings anticipated by early 2027.
During the review process, the regulator will gather evidence from customers, competitors, software developers, and other stakeholders across the business software market. “We want to ensure that digital markets remain open, competitive, and innovative,” the CMA spokesperson said. “Input from businesses and consumers will play an important role in helping us determine whether further regulatory action is necessary.”
The probe adds to mounting international regulatory pressure on major technology firms over concerns related to market dominance in software, cloud computing, and artificial intelligence. Microsoft has faced increasing scrutiny in several jurisdictions as governments and regulators move to address the growing concentration of power among a handful of global technology companies driving the next generation of AI services.
The company has not yet publicly detailed its response to the UK investigation, but Microsoft has previously maintained that its cloud and AI services are designed to expand customer choice and accelerate innovation.
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Businesses and stakeholders seeking to follow the investigation or submit evidence can access updates through the official UK Competition and Markets Authority portal.
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