The Competition and Markets Authority’s Strategic Market Status (SMS) investigation into Microsoft’s business software ecosystem is a direct acknowledgment that more must be done when it comes to the choice, security, and innovation that British businesses need to thrive.
Dozens of Organizations Are Sounding the Alarm
On June 23rd, the UK Competition & Markets Authority (CMA) published the comments of dozens of organizations — from large tech companies to insurance syndicates to universities to encrypted messaging startups — responding to the initial Invitation to Comment. There is a near unanimous call to action to address Microsoft’s anticompetitive practices.
The Coalition for Fair Software Licensing submitted case studies showing companies losing customers not because Microsoft’s product was better, but because it was effectively “free” inside the bundle. One cybersecurity firm serving a client generating over €23 billion in annual revenue lost the contract after that client acknowledged the competitor’s superior security solution — but cut it anyway to reduce costs. Another company’s entire 6% annual customer churn, all attributable to Microsoft bundling, comes directly out of its R&D budget.
The Computer and Communications Industry Association, Open Cloud Coalition, Cloudflare, Lloyd’s Market Association, Virgin Media O2, and Element are among those calling foul. Their message is consistent: Microsoft engineers its products to steer customers toward Azure, throttles API access for competitors while exempting its own tools, and is now embedding Copilot so deeply into enterprise workflows that it is becoming the unavoidable gateway to enterprise AI.
The voices speak for themselves:
- Lloyd’s Market Association (financial services): “Engagement with Microsoft operates on a ‘take it or leave it’ basis, making alignment expectations imposed on regulated firms more difficult than it should or could be.”
- Jisc (UK universities): “Seventy-four per cent of responding institutions reported that moving away from Microsoft, either wholly or partially, was not a viable option.”
- Virgin Media O2: “Pre-enabled settings are not customer-friendly and may entail a significant cost to businesses… such pre-enabled settings may be considered a form of self-preferencing by Microsoft.”
- OCC survey data: “Almost 65% of customers say swift action to improve cloud competition and reduce lock-in is very important. 68% of buyers expect regulatory delay to result in higher costs.”
- Anonymous AI provider: “UK organisations should be able to choose the AI tools that best meet their needs without being forced, in practice, to adopt Microsoft’s own AI layer in order to obtain effective access to their own work context, workflows and enterprise data.”
- CFSL: “Microsoft’s launch of the E7 bundle in April 2026 represents an acceleration of the bundling strategy that led to the anticompetitive outcomes identified in the EC’s Teams investigation. Unless Copilot is required to be offered and priced independently, Microsoft is likely to replicate the Teams playbook.”
A Decades-Long Playbook — Now Applied to AI
This is not a new story. Microsoft’s restrictive licensing schemes have been harming UK businesses for years, following its decades-long playbook of locking customers into its ecosystem. The strategy is simple: tie must-have software with adjacent products and services like Azure cloud services, security, and AI, then punish any customer who chooses products outside the Microsoft ecosystem with premium pricing, duplicate costs, and feature-limited software. The market power that allows Microsoft to exert this control on its customers, competitors and the entire market stretches back more than a quarter of a century and is, by any measure, unparalleled.
Microsoft’s behavior comes with a hefty price tag for customers. UK businesses, from mid-market enterprises to large government agencies, are locked into software ecosystems that carry a premium price attached to the absence of real alternatives. The House of Commons Science, Innovation and Technology Select Committee recently noted that Microsoft’s restrictive licensing practices will cost UK taxpayers £300 million by the end of the current Parliament. The Committee explicitly identified Microsoft’s licensing practices as a barrier to public sector digital transformation, citing the CMA’s own description of it being a “major concern.”
One of the most concrete and well-documented harms is Microsoft’s discrimination against customers who use competing cloud providers — the so-called “Listed Providers” — while granting its own Azure cloud services preferential treatment through mechanisms like Azure Hybrid Benefit. The CMA’s own cloud services market investigation found comprehensively that this practice has an “Adverse Effect on Competition.” Ending that discrimination must be a top priority.
The Window to Act Is Narrowing
The European Union’s experience with Microsoft’s anticompetitive practices around Teams is a cautionary tale: delayed intervention leads to ineffective outcomes. As more customers migrate from on-premises to cloud computing, and as AI and agentic enterprise workflows accelerate that transition, the window to intervene meaningfully narrows. Every month of delay locks more of the market in.
Microsoft has made gestures before — partial reforms to licensing portability, a nominal unbundling of Teams — but only after complaints were filed and pressure mounted from European regulators. Voluntary undertakings without teeth have a consistent track record: incomplete implementation, narrow customer scope, and technical barriers that undermine what was promised on paper. The CMA should weigh that history carefully.
No single remedy is sufficient. The competitive harms facing UK businesses are systemic and mutually reinforcing, the product of years of deliberate market entrenchment. That requires a package of binding conduct requirements — not voluntary commitments — addressing Microsoft’s licensing restrictions, tying and bundling practices, interoperability barriers, and the use of its substantial market power to extend and reinforce its position in adjacent markets including AI.
A Global Moment for Action
The CMA is not acting in isolation. Across the globe, from the U.S. to Brazil and beyond, Microsoft faces intensifying regulatory scrutiny over licensing and pricing practices that harm customers in both the public and private sectors. The U.S. FTC’s ongoing investigation into Microsoft’s bundling and licensing practices has put the same questions to American regulators. Regulatory authorities around the world have a real opportunity to act in concert.
The CMA has the authority, the expertise, and a formal process to fix this. There is still a window open to ensure both competition and customer choice is protected, but it will not stay open forever.