Dive Brief:
- The UK’s Competition and Markets Authority launched an investigation into Microsoft’s business software ecosystem, the regulatory agency said Thursday. The probe aims to determine whether product bundling, interoperability restrictions and embedded AI tools pose a threat to healthy competition, per the announcement.
- “Our aim is to understand how these markets are developing, Microsoft’s position within them and to consider what, if any, targeted action may be needed to ensure UK organizations can benefit from choice, innovation and competitive prices,” CMA Chief Executive Sarah Cardell said in a statement.
- The agency allotted nine months for the investigation, which will gather evidence from Microsoft and its customers and competitors. A decision on whether Microsoft should be given strategic market status and subject to sanctions under the UK’s Digital Markets, Competition and Consumers Act will be rendered by February of next year, the CMA said.
Dive Insight:
UK regulatory scrutiny is familiar territory for Microsoft.
The company was cleared last year by the CMA in an investigation of its partnership with OpenAI launched in 2023. The agency gave Amazon the green light for its partnership with Anthropic in a similar probe concluded in 2024.
Microsoft didn’t fare quite so well in a separate action related to cloud market competition. While Google and Amazon were also targeted in the investigation, Microsoft bore the brunt of the final decision, which singled out Microsoft for anticompetitive software licensing practices. The agency promised to impose targeted interventions to address the situation in July of last year.
The European Commission launched a similar investigation into the hyperscaler market last year.
In March, Microsoft made changes to its UK policies to address CMA concerns, reducing Azure egress fees and loosening restrictions on switching and multicloud interoperability.
“We recognize that the CMA will continue to review and assess additional issues relating to our products and services, including in the business software market,” Microsoft Vice Chair and President Brad Smith said in a blog post. “We are committed to working quickly and constructively to address these issues, including by providing all the information the CMA needs to move forward with its reviews.”
The company did not respond to Channel Dive’s request for additional comment prior to publication.
In the wake of EU regulatory pressure, Microsoft unbundled Teams from the 365 productivity suite in 2024, citing customer convenience rather than legal concerns.
However, the current CMA investigation came in the wake of major changes in Microsoft’s software licensing structure, which cut enterprise volume discounts and sowed confusion among its vast partner ecosystem. It also coincides with the rollout of the Microsoft 365 E7 and Microsoft Agent 365 AI-powered office productivity bundles, which are designed to drive agentic AI adoption.
The UK regulatory agency has AI in its sights as part of the probe.
“The business software sector is changing rapidly, with increased AI functionality and a shift towards agentic AI in familiar workplace tools,” the agency said in its Thursday announcement. “The UK will benefit most where customers can access the best tools in the market, and mix and match software and AI services from a broad range of competing suppliers. It is therefore important that competition in business software is working well.”
